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The Times: Analysts suggest that Shell should ponder mega-major

December 05, 2006
Bryce Elder

Shell, Europe’s largest oil company, closed 6p lower at £17.69 despite suggestions that the group would be sensible to investigate a multibillion-pound union with one of its closest peers.
 
“The case for merging Royal Dutch Shell with BP or Total is compelling and overlooked,” ABN Amro told clients. “The creation of an oil mega-major would generate important strategic and financial benefits for the companies and significant value for shareholders.”

Bringing together two companies both worth in excess of £100 billion is unlikely to be a simple task. Antitrust authorities would need to be placated, requiring sales of downstream operations, such as petrol stations. Nevertheless, David Cline, the ABN analyst, thought that the cost savings would make it worth the effort. He calculated synergies in excess of $10 billion (£5 billion) a year, equivalent to an extra £10 per Shell share if the Anglo-Dutch group’ s management were prepared to cede control. The Dutch broker conceded that the City was not expecting such an audacious move. However, it saw enough potential in the prospect to upgrade Shell to “buy” from “hold”. 
 
http://business.timesonline.co.uk/article/0,,8211-2487025,00.html


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