Royal Dutch Shell said that it will buy smaller rival BG Group for 47 billion pounds ($70 billion). Experts believe that this is “the first major energy industry merger in more than a decade.” Shell is also closing in on market leader U.S. Exxon Mobil following a drop in oil prices.
According to sources, the transaction will include the following information: Shell will pay BG cash and shares that value each BG share at 1,350 pence. This transaction has a value of around 52 percent to the 90-day trading average for BG. These values set the bar high should there be any form of counterbid by any oil company such as Exxon. The American multinational oil and gas company from Irving, Texas said it would also use the downturn in oil prices to expand.
The purchase improves Shell assets in Brazil, East Africa, Australia, Kazakhstan and Egypt. Shell will inherit BG’s projects in liquefied natural gas (LNG). Currently, the demand for other sources of energy has been sought as consumers turn away from coal which is considered the top polluting fuels. Shell will also acquire BG’s capacity in LNG logistics which includes infrastructures such as terminals, pipelines, specialized tankers, rigs, super coolers, regasification facilities and storage facilities.
Ben van Beurden, CEO of Shell, commented about the transaction of the decade: “Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on the industry landscape around us. Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace.”
Helge Lund, CEO of BG, provides his comments about the purchase: “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. The transaction will take time to complete, during which my team and I will remain committed to BG and our shareholders, and to safely delivering our 2015 business plan.”
Royal Dutch Shell plc commonly known as Shell is an Anglo–Dutch multinational oil and gas company which has headquarters in the Netherlands and incorporated in the United Kingdom. The company was from the merger of Royal Dutch Petroleum and UK-based Shell Transport & Trading. It is the fourth largest company in the world, in terms of revenue in 2014 and one of the six oil and gas top players. Shell is also listed as one of the world’s most valuable companies.
The largest shareholder of Shell is Capital Research Global Investors as of January 2013 with 9.85%; BlackRock is the second largest with 6.89%. In the 2013 Fortune Global 500 list of the world’s largest companies, Shell is found at the top of the list. Royal Dutch Shell revenue was equal to 84% of the Netherlands’ $555.8 billion GDP. Royal Dutch Shell stock market evolution: http://www.marketwatch.com/investing/stock/rds.a
About Ben van Beurden
Ben van Beurden is the CEO of Royal Dutch Shell plc. He joined Shell in 1983, after earning a degree in Chemical Engineering from the Delft University of Technology in the Netherlands.
About BG Group
BG Group plc is a British multinational oil and gas company with headquarters in Reading, United Kingdom. BG has operations located in 25 countries across Africa, Asia, Australasia, Europe, North America and South America. This massive oil company is able to produce around 680,000 barrels of oil equivalent per day. BG is the leader in Liquefied Natural Gas (LNG) business and it is the top supplier of LNG to the United States. As at 31 December 2009 the company has proven commercial reserves of 2.6 billion barrels (410,000,000 m3) of oil equivalent. BG Group is listed on the London Stock Exchange and under the FTSE 100 Index. It had a market capitalisation of £44.9 billion since July 2014 and is the seventh-largest company listed on the London Stock Exchange. BG stock market evolution: http://www.bloomberg.com/quote/bg/:ln
About Helge Lund
Helge Lund is a Norwegian businessman who is the Chief Executive Officer (CEO) of BG Group. He was also the former CEO of Statoil and Aker Kværner. Lund graduated in business management at the Norwegian School of Economics in Bergen. He also has a Master of Business Administration (MBA) from the INSEAD business school in France.