What’s next for Royal Dutch Shell? Is a multi-billion merger with BP just around the corner?
Article by Alessandro Pasetti published by The Motley Fool 8 Dec 2014
What’s next for Royal Dutch Shell? Is a multi-billion merger with BP just around the corner? Takeover rumours in the oil industry often emerge when oil prices weaken, and this time is no different. A Shell/BP tie-up would have to be financed by Shell equity, and is unclear why BP shareholders would want to hold Shell stock right now, unless a big premium were offered. Regulatory hurdles won’t be easy to overcome, which heightens execution risk. If Shell risks a multi-billion takeover, its shareholders could be the ultimate losers at a time margins are strained, the cost of extracting oil and gas is on its way up, and a few projects are pushed back or cancelled.
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“BP Is A Strong Buy, But Not Because of Takeover Speculation”
Seeking Alpha article by Bob Ciura: Published 8 Dec 2014:
It’s true that if a company were to launch a takeover bid for BP, the time is right for such a move. BP is now just a $122 billion company by market capitalization. This is a far cry from where BP used to be; BP was a $225 billion company by market value as recently as 2008. Since the 2010 oil spill, BP sold off a great deal of assets in an attempt to raise the necessary funds to cover the $43 billion in spill-related expenses taken so far. To compensate for this, BP has divested $38 billion of assets already and plans to offload an additional $10 billion in assets by the end of next year.
However, future liabilities associated with BP’s ongoing civil trial are yet to be determined, and this uncertainty is precisely why it’s extremely unlikely Royal Dutch Shell will attempt a takeover. BP could face as much as $18 billion in additional penalties if it is hit with the maximum penalties possible due to a violation of the Clean Water Act. It’s hard to imagine Royal Dutch Shell buying out BP with this lingering uncertainty.
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