Shell to take over BG Group

13 April 2015


Royal Dutch Shell has agreed to buy a long standing target, gas exploration group BG, for £47bn, $81 bn including debt. The offer has been prompted by a drop in BG's profitability brought on by the steep drop in oil prices over the last year, and Shell's aim to become the largest gas supplier in the world, in particular in the fast expanding LNG market.
The takeover of BG, formerly the exploration arm of British Gas, will be the energy sector's biggest for a decade and create a company worth £180 to 200 bn according to analysts. Shell is already Britain's largest company, with a valuation of about £130 bn, and the combined group will be more than 50% bigger than the second largest, HSBC bank.
BG Group's chief executive, Helge Lund, who joined in early February, will leave once the deal goes through next year, and could receive a payoff of more than £25m.
Shell offered cash and shares worth £13.50 per share - 50% more than BG's market value the day before the offer on 7 April. It is the biggest oil and gas takeover since Shell's Dutch and British arms were formally merged in 2004, and the 10th biggest mergers and acquisitions deal ever, according to data from Thomson Reuters.
£144 million of the asset value will disappear in payments to Helge Lund (£25 m) and the investment banks handling the takeover - Goldman Sachs and Robey Warshaw are reported to be receiving about £33m each for advising BG, while Bank of America Merrill Lynch will receive £55m for advising Shell.
The takeover, which must clear regulatory hurdles around the world including in Brussels and Australia, is expected to be completed during the first half of 2016.

 



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