Royal Dutch Shell Plc  .com Rotating Header Image

Shelling out too much

Screen Shot 2015-08-24 at 20.49.33

Screen Shot 2015-08-29 at 23.28.07

Screen Shot 2015-08-24 at 20.16.26

Mr van Beurden – who ill-advisedly said the deal only really sings once the oil price recovers to $90 a barrel – would be unwise to count on it. He’s on the hook for a £750m break fee if he pulls out, a pay-out he’d be hard pressed to survive.

By Jeremy Warner: Sunday Telegraph 30 Aug 2015

It would be wrong to say City investors are on the point of insurrection over Royal Dutch Shell’s blockbuster takeover bid for BG Group. Most big investors in Shell will also be major shareholders in BG, so if the stock and cash offer goes through, what they lose on the Shell roundabout they will gain on the BG swings.

None the less, it is ever more obvious Shell’s Ben van Beurden is overpaying for BG, as reflected in the fact that BG shares languish at a whopping great discount to the see-through value of Shell’s offer – 981p per share against 1134p.

I’m already hearing calls for a renegotiation of the terms.

Yet the chances of this happening seem remote. Yes, the oil price has sunk even further since the deal was announced, and the stock market as a whole has suffered a major correction. But it would be hard to argue that this amounts to the “material adverse change” that would justify revisiting the terms.

When Sir Martin Sorrell tried to claim “force majeure” as justification for reducing the terms of his offer for Tempus Group back in 2001, the Takeover Panel sent him away with a flea in his ear. If 9/11 didn’t count as a material adverse change, it’s unlikely worries about the outlook for the global economy will do the trick either.

There’s always the outside possibility that Chinese or Australian regulators will come to Shell’s rescue and stick a spanner in the works, but Mr van Beurden – who ill-advisedly said the deal only really sings once the oil price recovers to $90 a barrel – would be unwise to count on it. He’s on the hook for a £750m break fee if he pulls out, a pay-out he’d be hard pressed to survive. So he’ll soldier on. As a cheap way into the Shell dividend gusher, BG continues to look a pretty good bet. But if oil goes sub $40 …

SOURCE

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Shelling out too much”

Leave a Comment

%d bloggers like this: