Financial Times: Shell's LPG auction suffers double blow: Thursday 13 October 2005

By Peter Smith, Private Equity Correspondent

Published: October 13 2005

The €2.5bn (£1.7bn) auction of Royal Dutch Shell's liquefied petroleum gas business has suffered a setback after the unexpected departure of the division's chief executive and two investigations into anti-competitive pricing in the LPG sector.

Shell yesterday confirmed that Mike Treanor, head of the unit, had stepped aside and would be replaced by Charles Harrison.

"It was a mutual decision," Shell said, adding that Mr Treanor would remain with Shell for an interim period.

It is understood that Mr Harrison, a Shell veteran with knowledge of the LPG sector, would be prepared to move with the unit upon its sale. Mr Treanor had previously reported to Mr Harrison.

The LPG sector has been targeted by the UK and Polish authorities amid concerns about anti-competitive pricing.

The UK's Competition Commission recently found there was evidence that households were being overcharged for LPG because of limited competition.

After reporting provisional findings in August, the commission is due to publish its final report early next year.

Six bidders remain in the running to buy the business, which is still in the first round of the auction process in spite of it beginning at the start of the year.

They are BC Partners of the UK; PAI of France together with Bain Capital; Kohlberg Kravis Roberts with Goldman Sachs Capital Partners; Cinven in partnership with Ultragaz, the Brazilian gas company; and CVC Capital and Repsol, the energy group.

International Petroleum Investment, based in Abu Dhabi, is also interested but Blackstone, which had earlier teamed with Eurazeo of France, is thought to have dropped out.

The business appears likely to end up in the hands of a private equity group or a buy-out team linked with a strategic partner.

"It has been a very long first round," said a person involved in the auction. "Hopefully, it will go to a second round next month."

Shell last night said the timetable had not slipped.

"The auction is running to plan and we expect to be in discussions over the rest of the year and probably into 2006," the group said.

One bidder said that Shell had asked that due diligence be completed by the end of last month, with definitive bids this month.

Shell's LPG business operates in 33 countries, employs 3,500 people and has a global market share of about 2 per cent. 

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