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Top Investor Votes Both Ways On Shell Deal

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By Mark Kleinman, City Editor: 11 JAN 2016

A leading City investor is to vote some of its shares in favour of Shell’s £36bn takeover of BG Group, despite its public opposition to one of the oil industry’s biggest-ever deals.

Sky News has learnt that Standard Life Investments will vote its roughly 1.3% stake in BG in support of the tie-up at an extraordinary shareholder meeting later this month.

The decision will follow a vocal effort by Standard Life Investments’ top fund manager, David Cumming, to encourage Shell to renegotiate the terms of the deal.

In a statement issued on Friday, Mr Cumming said: “We have concluded that the proposed terms of the acquisition of BG are value-destructive for Shell shareholders.

“This view is based on the downside risks to Shell’s oil price assumptions plus the tax and operational risks surrounding BG’s Brazilian asset base. Consequently we shall vote against the deal.”

The decision to register opposing votes on the takeover reflects the City’s belief that the BG share price is at risk if the deal fails to complete.

Shell requires the approval of just over 50% of its shareholders to consummate the takeover, while BG needs to clear a 75% threshold.

Some fund managers are convinced that Shell is overpaying for BG but have decided to support it, partly because they have large cross-shareholdings in both companies.

Standard Life Investments’ statement last week made no reference to how it would vote its BG stake, which is worth approximately £400m.

The fund manager is underweight in its holding of both BG and Shell, but has a relatively bigger stake in Shell.

One source said the decision to vote its BG shares in favour of the deal underlined Standard Life Investments’ view that Shell’s offer overvalued the target.

“It is an unusual situation but it is logical for them to take this dual position,” said a City source.

Shell’s most ambitious takeover has already been approved by regulators around the world, but the company’s executives have faced increasingly robust questioning as oil prices have continued to fall.

On Monday, analysts at Morgan Stanley forecast that the price of Brent crude could fall to as little as $20-a-barrel (£13.75).

In documents released last month, Shell said it would cut thousands of jobs and further cut capital expenditure in response to the protracted oil price slump.

A spokesman for Standard Life Investments declined to comment.

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