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

Tim Haïdar
Posted: 04/07/2015

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.


Read More: Oil Price: The Top 25 Events That Rocked The Cost Of Crude Oil

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."

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."


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Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ

Tim Haïdar
Posted: 04/07/2015

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