Shell buys rival BG in £ 47bn mega- deal
ROYAL Dutch Shell yesterday kickstarted a potential fresh wave of mega- merger deals in the oil and gas industry after agreeing to buy FTSE rival BG Group for £ 47billion.
The biggest energy tie- up for more than a decade will create the world’s second biggest oil and gas company by market capitalisation, behind Exxon Mobil.
Shell’s cash and shares offer values BG’s stock at 1,350p, a premium of 50 per cent to its previous closing price. BG’s shareholders will own 19 per cent of the combined group.
Acquiring BG will strengthen Shell’s leading position in liquefi ed natural gas as well as providing exposure to BG’s deepwater assets in Brazil and exploration activities in East Africa.
Shell’s proven oil and gas reserves and production will be boosted by 25 per cent and 20 per cent respectively. It expects the combination to generate annual cost savings of about £ 1.7billion.
The slump in oil prices since last summer has increased the pressure on energy companies to secure proven assets rather than indulge in costly exploration, while low interest rates have increased the firepower available for major acquisitions. Shell chief executive Ben van Beurden said: “Bold, strategic moves shape our industry. BG and Shell are a great fi t.”
BG’s chairman Andrew Gould said the offer provides attractive returns for investors and has “strong strategic logic”, with Shell’s financial strength supporting development of BG’s exploration and LNG shipping. Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “The deal could prompt other companies who have been running the slide rule over potential targets to make their move.”
BG shares soared 242 ½ p to 1153p, while Shell dropped 189p to 2019 ½ p.