LONDON (Reuters) – Royal Dutch Shell agreed to buy smaller rival BG Group for 47,000 million pounds (70,200 million), the first major merger the sector in more than a decade, allowing the Anglo-Dutch oil close the gap that separates the US leader ExxonMobil.
Shell will pay a combination of cash and stock that values each share of BG in about 1,350 pence companies said Wednesday a joint statement.
The proposal provides a high prize close to 52% compared to the average price of the last 90 days of BG and puts a high stick to any opponent that could appear as Exxon, which has said it would take the floor in oil markets to expand.
The third largest acquisition of an oil and gas company history give Shell access to projects of billions of dollars in Brazil, East Africa, Australia, Kazakhstan and Egypt, which include some of the most ambitious initiatives of the world liquefied natural gas (LNG).
Shell is already the largest LNG company in the world and get with the purchase BG capabilities in logistics, complex infrastructure including terminals, pipelines, specialized tankers, coolers, regasification and storage.
“We’re seeing a gasification energy demand and Shell clearly realizes,” said Richard Gorry, director of JBC Energy Asia.
“Still, Shell is making a gamble because if the price of oil and gas is not recovered (in the next 24 months), I guess it will be in a difficult situation in terms of cash flow “he added.
Increased reserves
Curing jointly by Shell’s chief executive, Ben van Beurden, and BG chairman, Andrew Gould, the business is proposed following a low to half of oil prices since July and offers a prize for access to and tested against the high costs of exploration resources.
“We’ve been seeing a few opportunities with BG always at the top of the list of prospects for a union. We have two strong portfolios that combine deep water and gas integrated operations,” said Van Beurden in a conference call.
Shell stated that the operation would raise its proved oil and gas reserves by 25%. The company also plans to increase its sale of assets to 30,000 million between 2016 to 2018, following the agreement.
The British BG had a market value of 46,000 million dollars Tuesday, while Shell’s market capitalization was 202,000 million. Investors valued at Exxon, the world’s largest oil company publicly traded in about 360,000 million.
BG shares rose 35.9% to 1,237 pence, while Shell down 2.1% to 2,049 pence at 10:43 GMT. BG papers had lost 28% since mid-June, when it began falling oil prices.
Van Beurden said the presence of the two major companies in Australia, Brazil, China and the European Union may require discussions with antitrust authorities, but hardly lead to a sale of assets.
Shell will pay 383 pence in cash and 0.4454 shares of Shell B for each share of BG. BG shareholders will control about 19% of the new group.
The fall in oil prices since mid-2014, due to the rise of oil shale in the US and Saudi Arabia’s decision not to cut production, has created a similar early environment the 2000s, when there were several mega mergers.
At that time, BP bought Amoco and Arco, Exxon Mobil and Chevron acquired Texaco merged.
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