Shell Strikes $70b BG Takeover Deal

Shell Strikes $70b BG Takeover DealShell Strikes $70b BG Takeover Deal

Royal Dutch Shell said on Wednesday it had agreed to buy BG Group for $70 billion (£47 billion) in a bid to close the gap on the world's biggest oil major, US ExxonMobil.

In a joint statement, the two firms said that as part of the recommended deal Shell would pay a mix of cash and shares that would value each BG share at around 1,350 pence, TradeArabia reported.  This represented a premium of around 52 percent to the 90-day trading average, the company said.

The deal, which should generate pre-tax synergies of around £2.5 billion per year, will result in BG shareholders owning around 19 per cent of the combined group. Setting out its longer-term thinking, the two groups said Shell would pay a dividend of $1.88 per ordinary share in 2015 and at least the same amount in 2016. The deal will result in BG shareholders owning around 19 per cent of the combined group. Shell has a market capitalization of $202 billion and Exxon is worth $360 billion.

Anglo-Dutch Shell also expects to start a share buyback program in 2017 of at least $25 billion for the period 2017 to 2020. Shell said the deal would boost its proved oil and gas reserves by 25 percent, and give it better prospects in new projects, particularly in Australia LNG and Brazil deep water.

Shell also said it planned to increase asset sales to $30 billion between 2016-2018 on the back of the deal. The company said in January it was selling $5-6 billion worth of assets per year.

Back then, oil major BP acquired rival Amoco and Arco, Exxon bought Mobil and Chevron merged with Texaco. A lot of bankers have argued, however, that the era of easy super-mergers was over since then and the number of fresh acquisition targets was limited.

BG, which has ambitious production growth targets and multi-billion dollar projects in Brazil, East Africa, Australia, Kazakhstan and Egypt, has long been seen as a rare potential acquisition target, including by cash-rich rivals such as Shell or Exxon.