Royal Dutch Shell said it had agreed to buy BG group for 47 billion pounds in a bid to close the gap on the world's biggest oil major US ExxonMobil. That said, the deal in itself still needs approval from the shareholders of the two companies and will see BG group shareholders get 383 pence in cash plus 0.4454 shell shares for each BG share.
The deal should generate pre-tax synergies of around 2.5 billion pounds per year; these will result in BG shareholders owning around 19% of the combined group.
“The combination of our two businesses is a powerful one which has the sound strategic logic”, said Andrew Gould chairman of BG group in a conference call.
“BG’s deep waters positions and strengths in exploration, liquefaction and LNG shipping and the market will combine well with shell’s scale, development expertise and financial strength,” he said.
Shell said the deal would boost its proved oil and gas reserves by 25% and gives it better prospects in new projects particularly in Australia LNG and Brazil deep water, it is also planning to increase assets sales to 30 million US dollars between 2016-2018 on the back of the deal.
The deal also represents an opportunity for both firms to cut overlapping costs at a time when the energy sector is vulnerable to low oil prices indeed” shell’s executive said. The deal will cut their current spending on oil and energy exploration by close to half. Shell said it was selling 5.6 billion US dollars worth of assets per year.