Shell swallows rival BG group in $47bn deal

Shell swallows rival BG group in $47bn deal

Wednesday, April 8, 2015 11:36 am

Ben van Beurden, Chief Executive Officer of Royal Dutch Shell

Ben van Beurden, Chief Executive Officer of Royal Dutch Shell

Energy titan Royal Dutch Shell on Wednesday announced a mega takeover of British rival BG Group worth £47 billion, consolidating their positions in a sector battered by sliding oil prices.

The cash and shares deal, approved by the BG board and worth the equivalent of $70 billion or 64 billion euros, will help Shell to boost its flagging output thanks to BG’s strong position in liquefied natural gas (LNG), a cleaner alternative to energy types such as coal and nuclear.

The new company will be worth twice the value of BP and overtake US energy giant Chevron Corp. on finalising the sector’s biggest deal in a decade, according to Bloomberg News.

BG’s share price, which has tumbled over the past year on plunging oil prices, soared by almost 40 percent in reaction to Wednesday’s announcement.

“The boards of Shell and BG are pleased to announce that they have reached agreement on the terms of a recommended cash and share offer to be made by Shell for the entire issued and to be issued share capital of BG,” said a statement issued by the Anglo-Dutch group.

The offer represents a premium of about 50 percent compared with BG’s closing share price on Tuesday, costing Shell “approximately £47.0 billion” for its rival, the statement added.

“The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world,” Shell chairman Jorma Ollila said in the release.

BG chief executive Helge Lund said the deal “delivers attractive returns to shareholders and has strong strategic logic”.

He added: “BG’s deep water positions and strengths in exploration… will combine well with Shell’s scale, development expertise and financial strength.”

It is the first major deal for Lund, formerly chief executive of Norwegian energy giant Statoil, since he took up the reins at BG earlier this year.

Following Wednesday’s announcement, BG’s share price was up by a huge 37 percent to 1,251 pence on London’s benchmark FTSE 100 index, which was 0.48-percent higher overall to 6,995.43 points in early deals.

Shell ‘B’ shares — the ones used to finance the transaction — dropped 5.82 percent to 2,080 pence.



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