Shell to Buy Rival BG Group for USD 69.6 Billion

Royal Dutch Shell and BG Group have agreed on a GBP 47 billion (USD 69.6 bn) cash and share offer to be made by Shell for the entire issued and to be issued share capital of the British oil and gas company.

Shell expects the deal to accelerate its growth strategy in global LNG and deep water, as well as to add some 25% to its oil and gas reserves and 20% to production, each on a 2014 basis.

The Anglo-Dutch company also expects the tie-up to position the company better in new oil and gas projects, particularly in Australia LNG and Brazil deep water.

This combination will create the world’s largest LNG producer.

“This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders. The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world,” Jorma Ollila, Chairman of Shell, said.

”BG shareholders will receive significant value through the premium being offered for their shares. They will become shareholders in Shell, accessing an attractive dividend policy, a share in the significant synergies and the compelling upside and enhanced operating capability of the combined group. We believe that the combination is in the interests of both our companies and their shareholders.”

The two companies are described as highly complimentary in terms of their strategic priorities of deep water and LNG.

By applying its capabilities to the BG assets, Shell believes that, by around 2020, the combined group will have two strategic growth businesses – deep water and integrated gas – that could potentially each generate USD 15-USD 20 billion of cash flow from operations per annum; upstream and downstream engines that could potentially generate a further combined USD 15-USD 20 billion of cash flow from operations per annum in total; and long-term positions which could potentially add around a further USD 10 billion of cash flow from operations per annum.

The BG’s  Board of Directors intends unanimously to recommend that BG shareholders vote in favour of the tie-up, which is expected to become effective in early 2016.

“This offer represents an attractive return for BG shareholders. BG has a strong portfolio of operations including growth assets in Australia and Brazil and a highly competitive LNG business, as well as an enviable track record of exploration success. The BG Board remains confident in BG’s long-term prospects under the leadership of Helge Lund,” Andrew Gould, Chairman of BG said.

”Shell’s offer, however, allows us to accelerate and de-risk the delivery of this value. The structure of the offer will provide BG shareholders with an attractive premium and a substantial cash return as well as enabling them, if they wish, to participate in the benefits of the combination through the share component. For these reasons, the BG Board recommends the offer.”



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