Yesterday’s trading: Oil merger in pipeline
Geoff Foster,
3 July 2007, 8:24am
Red hot rumours suggest that top corporate financiers, financial advisers and executives of BP and Royal Dutch Shell are currently involved in round the clock discussions centred on finalising terms for a ‘friendly’ merger which many industry analysts believe would make a great deal of sense.
The oil industry invented mergers and acquisitions and a marriage between BP and Shell could possibly signal that the peak of the global takeover boom has been reached.
Believers in a BP/Shell tie-up reckon government regulators would give conditional approval to any deal. The ‘super group’, which would be producing more than 70% more oil and gas than industry leader ExxonMobil, would have to agree on gigantic disposals. The cost savings would be huge, in excess of £2.5bn, and the group’s operating efficiency would obviously be substantially improved.
BP, under the leadership of former boss Lord Browne, is said to have approached Shell about a deal last year.
Both companies have had a bad time it in recent years, although BP has suffered of late. It has been hit by regulatory investigations into safety, environmental and trading problems in the US which dogged Browne right up until his controversial resignation. His replacement Tony Hayward may have only been in the job for five minutes, but what better way to get the City firmly on his side than to help mastermind a ‘mega merger’ between two of the world’s oil greats.
Ahead of a deal, which could still be weeks away, Royal Dutch Shell ‘A’ gushed 33p to 2067p and the ‘B’ 31p to 2114p, while BP edged up 1p to 604p. A firm oil price, which traded above $72 a barrel at one time, aided sentiment while Shell was additionally buoyed by bullish broker comments. Morgan Stanley said Shell is undervalued by £60bn and Credit Suisse believes there could be £12.5bn of disposals in the pipeline. Its target price is £22.
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Shell and bp joining forces!!!hope not.They done it for 40 years,Shell Mez and BP in the downsream sector.They were the slowest moving heavyweifgt in the division.Distribution was a fiasco,rarely showing profit.It was almost a benevolent organisation into which you pour monry you want to hide.Depots in nearrly every town and village.Hubdreds of road truckks still runnung at horse delivery miles per hour.Then transport was outsourced to people who know what they are doing and they madi it work and made big money.Non profit terminals,most of whose outputs were to competers,were closed and load exchande agreements were drawn up.Bigger is not always better.Weve dropped the British from the title,dropped uk refineries and gone forth to earn a sad reputation on its global projects.
Maybe we should be gratefukk for the disascoiation with bp and British,