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Shell-BG deal to win green light

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Questions have been raised about the growing gulf between the price of BG shares and Shell’s cash and stock offer, while some market sources have argued that the low oil price could force Shell to renegotiate the deal and reduce its bid.

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Regulators in China and Australia likely to support move to create Britain’s biggest company

Chinese and Australian regulators are expected to give their blessing to Shell’s £55bn mega takeover of BG before Christmas, leaving the future of the deal resting squarely in shareholders’ hands.

The tie-up, which will create Britain’s biggest public company, has been under mounting scrutiny in recent weeks as the City questions whether Shell can justify pushing ahead, with oil prices remaining so suppressed.

However, the takeover will advance a major step towards completion in the coming weeks with the two sides anticipating clearance from China’s Mofcom regulator after the deal was passed into the final phase of its review process.

It is understood that Shell’s chief executive, Ben van Beurden, has recently had direct meetings with the president of China’s ministry of commerce, Gao Hucheng, a rare occurrence in the typically opaque process.

Mr van Beurden has criss-crossed the globe since announcing the deal in April, including travelling to meet regulators in Brazil and Trinidad, where BG has large gas facilities. The takeover will enable Shell to fulfil Mr van Beurden’s ambitious growth targets and leapfrog its top US rival ExxonMobil to become the largest liquefied natural gas (LNG) producer in the world.

There were initial concerns about the level of Mofcom’s scrutiny, with BG set to become the biggest supplier of LNG to China once it is in Shell’s hands. However, sources claim that Shell has already put remedy proposals to Mofcom.

China was originally said to be viewing the deal as an opportunity to renegotiate its long-term gas supply, billion-dollar contracts between Shell and the country’s energy champions, China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (Cnooc) and Sinopec, which could have strained the rationale for the takeover.

However, Cnooc and CNPC have already pledged their broad support in return for continued co-operation with Shell on projects around the world.

Competition lawyers say Mofcom has a history of demanding remedies that often favour China in return for approving a deal. In 2013, it agreed to wave through Glencore’s acquisition of Xstrata on the basis that its Peruvian Las Bambas copper mine was sold to a Chinese buyer.

The authority has become a nightmare for dealmakers, as they are given little visibility about how the regulator reaches its decisions, while staff shortages often mean that reviews can become drawn out affairs, even when there are limited competition concerns.

However, with the guidance of an army of advisers, Shell has rattled through competition clearances quicker than many anticipated, winning approval from the US, European Commission and Brazil’s beefed up CADE regulator.

It has also been given the green light from one of two Australian regulators after the Australian Competition and Consumer Commission (ACCC) said it was unconvinced by concerns raised by big local gas users.

The Australian Foreign Investment Review Board (FIRB), which applies a national interest test, still has to rule, but sources close to the deal said they anticipated clearance by the end of the year.

Approval from China and Australia paves the way for investors to vote on the deal. It needs 50.1pc of Shell investors and 75pc of BG’s shareholders to vote in favour.

Questions have been raised about the growing gulf between the price of BG shares and Shell’s cash and stock offer, while some market sources have argued that the low oil price could force Shell to renegotiate the deal and reduce its bid.

However, is understood Shell is determined to press ahead, particularly as this is the fourth time it has looked seriously at a takeover of BG since 2001.

Shell has met four of its top US investors, including Fidelity and Franklin, in the past few weeks in an effort to soothe any jitters. Shell is confident that shareholders will vote it through because 18 of its top 20 fund managers also hold BG shares.

Shell said: “We are working positively with Mofcom and are hopeful of a positive decision, but it is up to them to decide and we expect they will carry out a thorough and professional review.”

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