Shell set to acquire BG Group in $70 billion deal
Royal Dutch Shell announced that it has agreed a deal to acquire BG Group for approximately $70 billion in a deal that would expand the Anglo-Dutch firm’s presence to the majority of the world’s oil provinces and reaffirm its dominance of the global trade in natural gas.
The two companies confirmed details of a cash and share offer which gives investors a 50% premium on BG Group’s share price.
The deal would produce a company with a value of more than $296 billion, significantly closing the gap to US giant ExxonMobil, the world’s largest oil company valued at $360 billion.
Shell said the deal would also add 25% to its proven oil and gas reserves and 20% to production capacity, particularly in Australia’s liquid natural gas (LNG) market and in deep water oil exploration off the Brazilian coast.
Shell said BG Group shareholders would enjoy higher dividends, as it confirmed its intention to pay its existing shareholders $1.88 per ordinary share this year. That compares with a dividend of just $0.14 that BG Group shareholders can expect to receive this year. The oil giant also said it expected to commence a share buyback program in 2017 of at least $25 billion.
Shell said it would also provide BG Group shareholders with a “mix and match facility”, allowing them to vary how much they receive in cash and new Shell shares. Shell and BG Group expect to make annual savings of $2.5 billion following the deal.
BG Group shareholders will own approximately 19% of the combined group following the deal.
BG Group is the UK’s third largest energy company, and currently employs about 5,200 people in 24 countries. It was created in 1997 when British Gas split into two separate companies: BG and Centrica. BG took control of exploration and production while Centrica took charge of the UK retail business of the former British Gas. In 2000, BG split into BG Group and Lattice Group.
(Royal Dutch Shell & BG Group Press Releases)