Oil and gas major Royal Dutch Shell announced a recommended offer to buy BG Group for $70 billion (47 billion pounds) in a massive deal made up of cash and shares. Shareholders need to sign off on the deal, which, if approved, will see BG shareholders receiving $5.70 in cash, in addition to 0.4454 Shell B shares for each BG share, giving BG shareholders 19% of the combined company.
Shell and BG said the deal was a good one for shareholders of the companies amid commodity price fluctuations and uncertainty. Both companies stressed deep water and liquefied natural gas plays.
“We firmly believe that this is the right strategic next step for Shell’s shareholders, and for the shareholders of BG,” Shell’s Jorma Ollila, chairman of Shell, said. “By combining BG’s portfolio and skills set with Shell’s capabilities, we can deliver a step change in the growth priorities for both of our companies, accelerating our strategy in plays such as in deep water and liquefied natural gas.”
“This is a pivotal moment for both companies. We are combining our assets and operations to create an exceptional business, well set up to deliver attractive returns to both groups of shareholders,” Andrew Gould, chairman of BG Group, said.
“The assets of BG are strong and have great future potential, and our Board remains confident that under new Chief Executive, Helge Lund’s leadership, our business will deliver strong returns to shareholders over the long-term. Shell’s offer, however, allows us to accelerate the delivery of this value,” Gould added.
The merger of the two companies would add about 25% to Shell’s proved oil and gas reserves, and 20% to production, based on 2014 figures, and would offer Shell “enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water,” BG Group said.