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Shell-BG: more details of the deal

Screen Shot 2015-04-08 at 08.12.04FT: Shell-BG: more details of the deal

8 April 2015

Following the momentous news that Royal Dutch Shell is buying BG Group for £47bn, here are some more details for investors to chew over, including a promise of a big premium, enhanced dividends and a share buyback.

Financial details of the offer:

  • The deal, which gives BG investors 383p in cash and 0.4454 Shell B shares is based on a 90 day trading day volume weighted average price of 2,170.3p per Shell B Share on 7 April 2015.
  • This, Shell says, gives a value of approximately 1,350p per BG Share.
  • The 1,350p is a premium of approximately 52 per cent to the 90 trading day volume weighted average price of 890.4 pence per BG Share on 7 April 2015.

Why is it happening?

Shell believes there are major benefits to be had in taking on BG’s reserves and projects (in a market where low oil prices have made it unprofitable to develop new projects from scratch). From Shell’s statement:

Shell expects the combination to accelerate its growth strategy in global LNG and deep water.

The Combination will add some 25% to Shell’s proved oil and gas reserves and 20% to production, each on a 2014 basis, and provide Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.

Shell expects the Combination to generate pre‑tax synergies of approximately $2.5 billion per annum (which have been reported on) and has also identified further significant opportunities.

Anything else in it for shareholders of the combined group?

Shell, in fact, is offering some tempting giveaways if the deal goes through, namely:

  • Shell is proposing a share buyback of at least $25bn from 2017 to 2020, which it expects will “significantly reduce the equity issued in connection with the Combination”.
  • Dividends: Shell is promising “to pay dividends of $1.88 per ordinary share in 2015 and at least that amount in 2016”.                                                                                                                                                                                                                             SOURCE        
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