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Can BP plc Be Acquired By Royal Dutch Shell plc?

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Screen Shot 2014-10-28 at 12.29.57Bidness Etc discusses the prospects of BP being taken over by Royal Dutch Shell plc (ADR) owing to declining crude oil price

Published: Dec 2, 2014 at 2:21 pm EST

BP plc (ADR) (NYSE:BP) stock is up 2.6% on speculation that Royal Dutch Shell plc (ADR) (NYSE:RDS.A) might be interested in acquiring the British oil supermajor and thus move toward greater consolidation in the European energy sector. Around 7.9 million BP shares had been traded by 12:30 p.m. EST, which is 25% higher than the 30-day average daily trading volume of 6.32 million shares. Meanwhile, Royal Dutch Shell plc (ADR) (NYSE:RDS.B) stock price is also up more than 2.5% today.

But it looks highly unlikely that the Hague-based energy company will be making such a big move when outlook for the oil industry is highly uncertain due to the Organization of the Petroleum Exporting Countries (OPEC) maintaining crude oil output at 30 million barrels per day (bpd). Since the move by OPEC, Brent crude (NYSEARCA:BNO) futures have lost 7.8% of their value, while West Texas Intermediate (WTI) (NYSEARCA:USO) futures are down 7.6% in the same period.

Another obstacle to the merger will be challenges from regulatory authorities across the world. Furthermore, BP’s exposure in Rosneft also makes it an unattractive target because of economic sanctions in place on Russia.

News of BP being a takeover target first made rounds last month, originating from Oppenheimer Holdings Inc., Fadel Gheit, and Luis Amadeo. They highlighted that a potential merger with any other oil supermajor will result in cost saving of approximately $10 billion.

Bidness Etc believes these takeover talks are merely rumors, and that there is no concrete interest shown by Royal Dutch Shell owing to overall distress in the energy sector.


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