Shell to buy BG Group in megadeal worth $70 billion



UK-based Royal Dutch Shell (NYSE: RDS.A) agreed Wednesday to buy Britain’s BG Group in a deal worth $70 billion in cash and stock. The mega-merger creates a massive European energy conglomerate in one of the largest deals of the decade.

The news comes at a time when mergers are the norm for oil service providers amid slumping oil prices.

Related: Shareholders approve $7.6 billion deal for Siemens to acquire Houston-based Dresser-Rand

If approved by both companies’ shareholders, BG Group shareholders get 383 pence ($5.70) in cash, plus 0.4454 Shell B shares for each BG share. BG shareholders will also own 19 percent of the company.

London-listed shares for BG soared by 38 percent while Shell’s fell by 2 percent amidst the announcement.

“The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world,” Shell chairman Jorma Ollila said in a statement.

Related: This signals more oilfield mergers may be coming

Helge Lund, BG’s chief executive, said the offer delivers “attractive returns to shareholders and has strong strategic logic.”



Shell estimates the deal would produce increases of more than $2.5 billion a year and cut overlapping cost.

The price of oil has reached a six-year low, falling more than 50 percent since last June as a result of oversupply, primarily due to increased drilling in the US. Also, conflict in the Middle East further adds to the burden of its volatility.

In a statement released Tuesday, Goldman Sachs stated that prices should remain flat to slow down US production growth.

Related: Oil prices need to remain low to slow down US output: Goldman Sachs

Surging more than 6 percent in US trading Monday (WTI), the price of oil has recently been on a wild ride. Both benchmarks have posted strong gains in the past two session.


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