Yes Shell could offer a straight cash bid over the BG offer -...

Yes Shell could offer a straight cash bid over the BG offer - Firb approval should not be a problem - same as BG situation.

But also AOE could up its bid, by placing shares to Shell -it can issue up to 15% without s/h approval ie 704m x 15% = 105.6m x $2.50 say = $264m. That $264m is equal to about $2.12 per PES share.

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I think the important point here is that AOE do not NEED to better the BG bid, it just has to be close - because the directors of PES and some PES s/h would rather an AOE scrip component in the bid.

BG cannot offer scrip, nor can Shell.