The Bitesize Guide To Shell's $69.6 Billion Takeover Of BG Group

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Tim Haïdar
04/08/2015

Supermajor Royal Dutch Shell today agreed to buy exploration firm BG Group in a deal valued at $69.6 billion (£47 billion). Below are the vital statistics behind this mega-merger.

The essentials

Anglo-Dutch supermajor agrees a fee for takeover of UK independent
Combination will give birth to the world’s biggest liquefied natural gas (LNG) producer
Merger will create the largest company on the FTSE exchange
CEO of BG Group, Helge Lunde, expected to depart after less than four months at the helm

Portfoilio

Complementary fits in 15 countries of operation
Enhanced positions key growth areas of LNG and deep water plays
BG Group assets will add positions in Brazil, Kazakhstan, US shale and North Sea mature assets.

Financials

BG shareholders will receive £3.83 in cash and 0.45 Shell B shares
Shell expects to create $2.5bn of synergies a year from deal

Cashflow

Deep water and integrated gas activity to generate $15-$20bn cash flow per year.
E&P and refining to add a further $15-$20bn.
Current producing assets to bring in an additional $10bn.

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WHAT THEY SAID

Commenting on today’s deal, Jorma Ollila, Chairman of Shell 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. 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 he 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."

Shell CEO Ben van Beurden remarked "Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on he industry landscape around us. At the start of 2014, Shell embarked on an improvement programme, including divestments and the restructuring of underperforming businesses, whilst at the same time delivering profitable new projects for shareholders. This programme is delivering, at the bottom line. BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell's growth priorities and areas where the company is already one of the industry leaders. Furthermore, the addition of BG's competitive natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel. This transaction will be a springboard or a faster rate of portfolio change, particularly in exploration and other long term lays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios. Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace."

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Andrew Gould, Chairman of BG had this to say: "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. 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 substantial cash return as well s 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."

Helge Lund, CEO of BG added: "The offer from Shell delivers attractive returns to shareholders and has strong strategic logic. BG’s deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell’s scale, development expertise and financial strength. The consolidated business will be strongly placed to develop the growth projects in BG’s portfolio. The transaction will take time to complete, during which my team and I will remain committed to BG and our shareholders, and to safely delivering our 2015 business plan."