The World’s Second Ultramajor
THE PARTICULARS: Royal Dutch Shell shareholders voted 83 percent in favor of Shell’s £34-billion (US$49 billion) bid to buy BG Group, and 87 percent of BG shareholders followed suit, with a formal completion slated for Feb. 15.
Dissenting shareholders included Standard Life Investments, Shell’s 11th-biggest shareholder. Citing “downside risks,” including Shell’s oil-price assumptions, it voted against the deal.
Over two-thirds of the takeover is funded by Shell’s B shares. The value of the deal has tracked tanking oil prices from US$70 billion in April 2015 to US$50 billion in January. Last April, Shell offered a 50 percent premium to the market value of BG shares, which soon shrank to below 10 percent. THE PAYOFF: Shell now rivals ExxonMobil in the ultramajor league, with both expected to produce 4.3 million barrels of oil equivalent per day in 2020, according to Wood Mackenzie. ExxonMobil will lead in unconventionals and Shell in LNG and deepwater production.
The deal will boost Shell’s oil and gas reserves by 25 percent and strengthen its presence in the LNG market. Shell CEO Ben Van Beurden says he’s delighted with the “confidence that shareholders have shown in the strategic logic” of the deal. This is Shell’s biggest-ever acquisition, powering it past Chevron to become the world’s secondlargest non-state oil company.
The takeover will raise Shell’s market value to nearly US$175 billion, while boosting reserves and production, enhancing cash flow and broadening its ability to pay dividends.