Shell buys BG Group for $70 billion

Royal Dutch Shell announced today to buy the BG Group for £47 billion ($70 billion).

Royal Dutch Shell announced today to acquire BG Group for for £47 billion ($70 billion), which could be the largest deal of 2015. 

The Boards of Shell and BG Group reached agreement on the terms of a recommended cash and share offer to be made by Shell for the entire issued and to be issued share capital of BG. Under the terms of the Combination, BG shareholders will be entitled to receive for each BG Share 383 pence in cash and 0.4454 Shell B Shares.

The combined companies 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. 

Ben van Beurden, CEO of Shell said: “Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on the industry landscape around us. At the start of 2014, Shell embarked on an improvement program, including divestments and the restructuring of underperforming businesses, whilst at the same time delivering profitable new projects for shareholders.

This program is delivering, at the bottom line. BG will accelerate Shell ’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell ‘s growth priorities and areas where the company i s already one of the industry leaders. Furthermore, the addition of BG ‘s competitive natural gas positions makes strategic sense, ahead of the long – term growth in demand we see for this cleaner – burning fuel.

This transaction will be a springboard for a faster rate of portfolio change, particularly in exploration and other long term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios. Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace.”

Key Points of the Shell BG Group Deal:

• 0.4454 Shell B shares and 383p in cash per BG share
• Represents a value per BG ordinary share of 1350p, a premium of 52%
• Values BG equity at £47.0 billion
• BG shareholders to own 19% of Shell
• Transaction underpinned by intrinsic asset value of BG
• Mildly accretive to earnings per share in 2017 and strongly 
• accretive from 2018
• Accretive to cash flow from operations per share from 2016

Ben van Beurden, Chief Executive Officer of Royal Dutch Shell plc will host two live audio webcasts of the Recommended Cash and Share Offer for BG Group plc by Royal Dutch Shell plc on Wednesday April 8, 2015 at 09.00 BST (10.00 CEST, 06.00 EDT) and at 15.00 BST (16.00 CEST, 10.00 EDT).