LONDON, May 22 (Reuters) - Royal Dutch Shell is likely to have to wait to secure its $2 billion takeover of Cove Energy as shareholders in the Mozambique-focused target company look for potential counter-bidder Thailand's PTT to show its hand.
Some Cove investors said on Tuesday they expected Shell to extend the tender period for its 220 pence a share offer, as they said they would not offer their shares ahead of the 1200 GMT, May 23 deadline Shell has set for acceptances.
"I wouldn't expect anyone to tender (their shares)," said one hedge fund manager who holds Cove shares.
Indeed, with Cove shares trading at 222 pence at 1218 GMT on Tuesday, investors would realise more cash, more quickly, by selling into the market than tendering and waiting for a cheque from Shell.
Three sources close to the process said around 70 percent of Cove shares were in the hands of risk arbitrage hedge funds, whose strategy is to squeeze every last penny out of a takeover situation.
Such funds are masters at measuring up the eagerness of buyers, and they figure that even though Shell set a condition of 90 percent acceptances for its bid to be binding, they don't see any risk that they will be left holding their Cove shares, which traded at around 100 pence in January.
"Shell's not going anywhere," another hedge fund manager said.
Shell's 220 pence a share, or $1.8 billion, bid last month, matches an earlier bid from PTT. However, Shell's bid includes a commitment to cover a tax bill announced by Mozambique after PTT's bid. Shell's Chief Financial Officer said the tax pushed the value of Shell's proposal to $2 billion.
Shell and Cove declined comment on Tuesday.
After Shell announced its bid, PTT said it was considering its options. The company declined to comment on Tuesday but investors said the absence of a statement saying it was withdrawing its interest, means there remains a chance PTT could yet bit.
Some have given up hoping.
Lionel Melka, partner at Paris-based Bernheim, Dreyfus & Co sold his shares at 225 pence after the Shell bid was announced.
"If there was a white knight it would have emerged by now We believed the chance of a counterbid was very, very small," he said.
However, some Cove investors say PTT would have issued a statement if it didn't plan to make a bid, even though takeover rules don't oblige it to.
"Most advisers would say it's the sensible and mature thing to do. Also the bid speculation is weighing on their shares, so they would like that to go away if they don't plan to bid," a fourth hedge fund manager said.
Fears that PTT may be forced to issue shares to buy Cove has weighed on the group's stock in recent months.
Also, some Cove investors said they saw encouraging signs from PTT's management when they visited London earlier this month to sound out investors on a potential bond issue.
According to two people who met with PTT, the company did not rule out a Cove counter-bid and said it had financing options for this, such as a share issue or the issue of a perpetual bond, that would enable it to raise any cash needed for a Cove bid, without compromising its credit rating.