Through the takeover Shell would enter the hydrocarbon-rich territories of Mozambique and Kenya, adding to existing interests in nearby Tanzania. The Anglo-Dutch company said it would bring the firepower and expertise to develop Cove's assets, the most significant of which is an 8.5% stake in the Rovuma liquefied natural gas project off the Mozambique coast. Cove also has a 15% interest in five offshore blocks in Kenya and assets in southeastern Tanzania, including 20.4% of the Mnazi Bay exploration project.

"Shell management is confident that its innovative technologies, leading plant designs, unmatched LNG operational experience and proven commercialization strategies, combined with the experience of the operator of the Mozambique Rovuma Offshore Area 1 Block and the joint venture partners can add significant value to the project," Shell said.

Shell's 195 pence-per-share offer would equate to a 73% premium to Cove's share price on Jan. 4, just before it announced a formal auction process for the whole company after parties expressed an interest in its Rovuma project. Cove said its board would expect to recommend an offer at that level if made - the deal is conditional on Mozambique government consent on terms satisfactory to Shell. Cove's directors would give irrevocable commitments to tender their shares if the offer proceeds, Shell said.

However, Cove expects to continue its sales process in the interim.

Cove's shares in London were up 26% at 194 pence following the announcement.

Cove's chairman is Michael Blaha, who until October 2009 was country head for Shell in Algeria. Cove's CEO is John Craven. The company was founded in 2003 and is headquartered in London.

Shell, led by chairman Jorma Ollila and CEO Peter Voser, expects to finance the deal from existing resources. Shell has a market value of £146.4 billion ($229.9 billion).

Morgan Stanley & Co. 's Michael O'Dwyer and Ian Hart are advising Shell. Standard Chartered plc's Amer Baig, Geraldine Murphy, Rob Tims, Hein Pieter Boers and Aditya Yadav are advising Cove, alongside Cenkos Securities plc's Jon Fitzpatrick, Ken Fleming and Joe Nally.