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Daily Mail (UK): Talk of an oil mega-merger revives hopes of big gains

Saturday 09 December 2006
City & Finance Page 95

THE notion of a giant merger between BP and Shell refuses to die down. Broker ABN Amro has run the numbers and reckons a deal could add up to £93bn of value.

A Shell merger with France’s Total would deliver as much, a BP Total combination slightly less.

David Cline of ABN Amro says: `The case for creating an oil mega-major, by merging two European supermajors, is compelling but overlooked by the market.’ He thinks shareholders would gain up to 63pc from a deal.

Could it happen? After BP’s stunning trio of deals (Mobil, Arco, Burmah Castrol) in the late 1990s, US regulators slammed the door on big oil mergers.

It is hard to see a BP-Shell tie-up being cleared in the US without huge disposals.

What the Europeans would make of it is even harder to guess. Competition Eurocrats have intervened even in deals between US companies.

Since they tolerate so many power firms which dominate their local markets, they might buy the idea of a European global champion.

ABN thinks BP and Shell could combine exploration efforts without problems. Refineries and petrol stations are a different matter.

The notion of BP bidding for Shell surfaced during Shell’s reserves fiasco, but did not get far. The two are now more evenly balanced.

Huge obstacles still loom, but as ABN points out, the gains could also be huge.

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