Shell to buy Britain's BG Group for $69.6 bn
08 April 2015
European petroleum giant Royal Dutch Shell Plc today struck a deal to buy Britain's BG Group in a cash and stock deal worth $69.6 billion.
Under the terms of the deal, BG Shareholders will receive 383 pence in cash for each BG Share and 0.4454 Shell B shares, a 50 per cent premium to BG's Tuesday closing share price of 910.4 pence.
Post closing, BG shareholders will hold 19 per cent of the enlarged company, while the remaining will be held by Shell shareholders.
Shell expects the merger to generate pre-tax synergies of approximately $2.5 billion per annum and has also identified further significant opportunities.
Ben van Beurden, CEO of Shell said, ''BG will accelerate Shell's financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell's growth priorities and areas where the company is already one of the industry leaders. Furthermore, the addition of BG's competitive natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel.''
''The offer from Shell delivers attractive returns to shareholders and has strong strategic logic. 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, said, Helge Lund, CEO of BG.
A potential merger with BG Group would create a company with a market capitalisation of more than $296 billion (£200 billion) and annual revenues of $440 billion.
The combined company would overtake Chevron Corp as the world's second-largest oil and gas producer and close on to market leader Exxon Mobil.
A successful BG deal would be Shell's largest acquisition after its $7-billion purchase of the 22-per cent stake in Shell Canada that it did not already own.
The acquisition will add some 25 per cent to Shell's proven oil and gas reserves and 20 per cent to production, and provide it with an enhanced position in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.
With a current market value of $46 billion, BG Group, Britain's third-largest energy company, was formed in 1997 after the break-up of UK's state-owned utility British Gas.
The Reading-based company operates in 24 countries across Africa, Asia, Australasia, Europe, North America and South America and produces around 680,000 barrels of oil equivalent per day.
It is the largest supplier of LNG to the US and will be the largest contracted supplier to China by 2017
The London Stock Exchange-listed company has a market value of $46 billion and posted revenues of $19 billion last year.
Shell is one of the world's largest energy companies and one of the six oil and gas super-majors with a market value of about $192 billion and annual revenues of $421 billion.
The Anglo-Dutch company operates in over 70 countries, produces 3.1 barrels of oil equivalent per day. It is also among the world's largest natural-gas companies and has sold 24 million tonnes of LNG last year.
A deal between the two energy companies comes amid the recent collapse in global oil prices and BG's record $5-billion loss in the fourth quarter.
Both companies, like other rivals, have scaled down on spending on new projects. Shell recently announced that it would reduce its planned capital spending over the next three years by $15 billion, while BG Group said it would write down the value of its oil-and-gas assets by nearly $9 billion due to fall in oil prices.
A potential deal would give Shell the offshore Brazilian oil blocks of BG Group as well as its undeveloped gas blocks in East Africa and its massive $24 billion Queensland Curtis liquefied natural gas project in Australia.
Post merger, Shell expects to make substantial disposals of non-core assets of around $30 billion during 2016 to 2018.