Shell reaches agreement on £47bn deal to buy BG Group
Oil and gas giant Royal Dutch Shell has agreed a takeover of oil and gas exploration company BG Group in a deal which values the business at £47bn.
It is estimated that the deal will result in the creation of a company worth £200 billion.
The deal is likely to have significant implications for workers at Reading-based BG Group’s gas fields more than 150 miles off the coast of Aberdeen.
BG, which was spun out of British Gas in 1997, is also a significant player in other fields, with a stake of just over 21 per cent in the Buzzard oil field, run by Nexen, around 35 miles off Peterhead.
It also has a major interest in Conoco-Phillips J-Area and Jasmine fields and a 14.1 per cent interest in French oil giant Total’s Elgin/Franklin area.
It is understood that under the terms of the deal, investors will receive a premium of about 50 per cent on BG’s closing share price of 910.4 pence as at 7 April.
BG shareholders will own around 19 per cent of the enlarged group.
Shell said that the deal will result in its oil and gas reserves swelling by 25 per cent as well as boosting production by 20 per cent.
Shell also stressed that the acquisition will give it the opportunity to take on new oil and gas projects, particularly in Australia and Brazil.
Shell has also pledged to pay a dividend of $1.88 per ordinary share this year and “at least that amount” next year.
It expects the deal to generate cost savings per year of $2.5bn.
Shell chairman Jorma Ollila said: “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.
“We believe the combination is in the interests of both our companies and their shareholders.”
BG chairman Andrew Gould said: “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 liquefied natural gas 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. Shell’s offer, however, allows us to accelerate and de-risk the delivery of this value. For these reasons, the BG board recommends the offer.”
The oil price has fallen dramatically over recent months with prices dropping by more than 50 per cent in the second half of last year. Shell announced earlier this year it was to decommission its rigs in its Brent field operations.