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Shell And BG Shareholders Approve Their Merger

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BG Group shareholders have approved the company’s acquisition by Shell, announced last April. The move follows the approval by Shell shareholders of the deal earlier this week. It is the largest acquisition in the O&G space since Exxon bought Mobil in 1998.

“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,” BG Group said in a Thursday statement.

The deal will result in BG Shareholders owning approximately 19% of the combined company. Shell expects the acquisition to accelerate its LNG and deepwater growth strategy.

Once final regulatory requirements are met, the deal is expected to close in mid-February.

Too High A Price?

Since April, some shareholders had questioned whether Shell was paying too high a price for the takeover.

Shell CEO Ben van Beurden has said, however, that the deal will increase Shell’s cash flow and enhance Shell’s ability to pay dividends, and BG Group’s rising output will help bolster Shell’s falling production, Bloomberg noted in a Wednesday report.

How The Combined Company Will Look

The combination will add around 25% to Shell’s proved O&G reserves and 20% to production, each on a 2014 basis. It will also provide Shell with enhanced positions in competitive new O&G projects, particularly in Australia LNG and Brazil’s deepwater sector.

enter image description hereSource: Shell

Shell says that by 2020 the combined company will have the following:

  • “two strategic growth businesses – deep water and integrated gas – that could potentially each generate $15-$20 billion of cash flow from operations per annum;
  • “upstream and downstream engines that could potentially generate a further combined $15-$20 billion of cash flow from operations per annum in total; and
  • “long-term positions which could potentially add around a further $10 billion of cash flow from operations per annum.”

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Management Commentary

Shell CEO Ben van Beurden commented on the combination: “This transaction will be a springboard for a faster rate of portfolio change, particularly in exploration and other long term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios.”

Helge Lund, CEO of BG Group, said: BG’s deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell’s scale, development expertise and financial strength. The consolidated business will be strongly placed to develop the growth projects in BG’s portfolio.”

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