Biggest oil & gas deal in a decade
In the biggest oil and gas deal in a decade, Royal Dutch Shell on April 8 announced acquisition of the smaller British rival BG Group Plc for about $70 billion to create the world’s largest independent producer of LNG.
Shell will pay a 50 per cent premium to BR’s closing share price on the previous day of 910.4 pence, with an offer consisting of 383 pence in cash and 0.4454 of Shell’s B shares for each BG share, the companies said.
The deal, the first major acquisition since oil prices began to slump last July, would be among the largest oil-and-gas deals of past two decades and the biggest in the last 10 years. It will surpass the 44.4 billion pounds all-stock acquisition by Glaxo Wellcome of London-based SmithKline Beecham in 2000 to become the biggest UK deal. The biggest European deal, however, remains Vodafone AirTouch Plc’s $202.8 billion acquisition of Mannesmann AG in 1999.
The merged company will surpass Chevron Corp and close gap on market leader ExxonMobil of the US. If approved by shareholders, it will help Shell become the world’s largest producer of liquefied natural gas (LNG). The move gives oil grant Shell a greater stake in the world’s natural gas markets in the wake of tumbling oil prices.
“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 by the Anglo-Dutch Group.
“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.”
The deal, which values BG at about 47 billion pounds, will give BG shareholders a 19 per cent stake in the combined company. The deal is expected to close in early 2016, Shell CEO Ben van Beurden said.
A joint statement said the Boards of both companies are recommending that shareholders approve the deal that will create a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world.
Shell said the takeover will add 25 per cent to its proved oil and gas reserves and 20 per cent to production compared with 2014, and boost its position in new oil and gas projects in Australia and Brazil. Combining the two companies will produce savings of about 2.5 billion pounds a year.
– PTI Economic Service