In the biggest oil and gas deal in a decade, Royal Dutch Shell today announced acquisition of smaller British rival BG Group Plc for about USD 70 billion to create the world’s largest independent producer of LNG.
Shell will pay a 50 per cent premium to BG’s closing share price on Tuesday of 910.4 pence, with an offer consisting of 383 pence in cash and 0.4454 of Shell’s B shares for each BG share, the companies said today.
The deal, the first major acquisition since oil prices began to slump last July, would be among the largest oil-and-gas deals of past two decades and the biggest in last 10 years.
It will surpass the 44.4 billion pounds all-stock acquisition by Glaxo Wellcome of London-based SmithKline Beecham in 2000 to become the biggest UK deal.
The biggest European deal, however, remains Vodafone AirTouch Plc’s USD 202.8 billion acquisition of Mannesmann AG in 1999.
The merged company will surpass Chevron Corp and close gap on market leader ExxonMobil of the US. If approved by shareholders, it will help Shell become the world’s largest producer of liquefied natural gas (LNG).
“The boards of Shell and BG are pleased to announce that they have reached agreement on the terms of a recommended cash and share offer to be made by Shell for the entire issued and to be issued share capital of BG,” said a statement issued by the Anglo-Dutch group.
“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 the release.
BG chief executive Helge Lund said the deal “delivers attractive returns to shareholders and has strong strategic logic”.
The deal, which values BG at about 47 billion pounds, will give BG shareholders a 19 per cent stake in the combined company. The deal is expected to close in early 2016, Shell CEO Ben van Beurden said.
Shell said the deal would boost its proven oil and gas reserves by 25 per cent.
Van Beurden promised a “focused, streamlined company” that “will be able to manage capital discipline with much higher precision.”
The acquisitions comes at a time when the cost of a barrel of Brent crude, the global benchmark, has fallen from USD 114 to less than USD 60.
During the previous oil slump in 1998 when crude hovered below USD 12 a barrel, BP announced plans to take over Amoco. Exxon followed suit with the mega-buyout of Mobil Corp. Chevron merged with Texaco and Total SA purchased PetroFina and Elf Aquitaine.