Shell to buy BG for $70b in major industry merger in 10 years | Independent Newspapers Limited
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Shell to buy BG for $70b in major industry merger in 10 years

Posted: Apr 10, 2015 at 5:43 am   /   by   /   comments (0)

Royal Dutch Shell said it has agreed to buy smaller rival BG Group for $70 billion in the first major oil industry merger in more than a decade. With this move Shell has closed the gap on market leader ExxonMobil after a plunge in prices.

According to the report, Shell said it will pay a mix of cash and shares that values each BG share at around 1,350 pence ($20), which industry watchers believe is a hefty premium of around 52 percent to the 90-day trading average for BG, setting the bar high for any potential rival bidders.

The report noted that the merger, which is the biggest this year will give Shell access to BG’s multi-billion-dollar operations in Brazil, East Africa, Australia, Kazakhstan and Egypt, including some of the world’s most ambitious liquefied natural gas (LNG) projects.

The agreement was sealed by Shell CEO, Ben van Beurden, and BG Chairman, Andrew Gould, coming after oil prices halved since last June, putting a premium on access to proven assets rather than costly exploration.

Shell’s Van Beurden said, “We have been scanning quite a few opportunities, with BG always being at the top of the list of the prospects to combine with. We have two very strong portfolios combining globally in deep water and integrated gas.”

Shell said the deal would boost its proven oil and gas reserves by 25 percent, and also plans to increase asset sales to $30 billion between 2016 and 2018 on the back of the deal.

According to the report, Britain’s BG had a market capitalization of $46 billion as of Tuesday close; Shell was worth $202 billion while Exxon, the world’s largest oil company by market value, was worth $360 billion.

The report said BG shares leapt 37 percent for 1,250 pence, while Shell’s were down 2.2 percent at 2048 pence, noting that BG shares have tumbled nearly 28 percent since mid-June, when the slump in global oil prices started.