Royal Dutch poised to Shell out for BG Group

It’s been almost a year since it was announced but the Royal Dutch Shell (Shell) takeover of BG Group could very soon be given the green light.

On 8^th April 2015 BG Group and Shell released an announcement that stated:

“The Boards of Shell and BG are pleased to announce that they have 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.”

Now, ten months on, the Scheme of Arrangement is set for a final decision, with shareholders of Shell and BG Group voting to approve the merger at two meetings on 27^th January and 28^th January 2016 respectively.

Key shareholder advisory backing

The £36billion takeover bid made by Shell for the British-based integrated natural gas producer has this week been given a thumbs up by the oil giant’s key shareholder advisory group, Glass Lewis.

This despite the falling price of oil per barrel leading some speculators to question the wisdom of the deal, especially considering the share price and cash offer agreed back in April 2015 when the price per barrel of Brent Crude oil was at $55.03 (taken from Bloomberg on 8^th April 2015).

As it stands, holders of BG Group shares will receive £3.83 and 0.4454 Shell B shares in exchange for each BG Group share.

Both companies have seen their share price steadily dwindle as the price per barrel of oil has dropped.

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Source: Bloomberg

Past performance is not a reliable indicator of future results

But Shell chief executive Ben van Beurden remains upbeat about an increase in oil prices. He is quoted on This Is Money over the weekend saying:

“The oil prices we are seeing today are not sustainable and are going to settle at higher levels over the next few decades than the low $60s that we require to make this deal a good deal.”

This view was shared by Glass Lewis who said, in a statement:

“We see a reasonable basis to maintain a belief that over the long term oil prices will recover.”

But not everyone has been as confident. Investors like Standard Life have opposed the deal based on market expectations that could see the price per barrel of oil drop to $20 in the immediate future.

Decision time

Anyone invested in BG Group will be given a choice of what they want to do with their shares:

In addition to the default option, which offers £3.83 and 0.4454 Shell B shares for each BG Group share, there is a mix and match facility taking into account the needs of investors who would prefer to receive the Euro dividend paying line of stock (RDS A share) and those preferring more cash or more stock.

Any TD customers with BG Group shares will have until 9^th February 2016 to notify us of their decision, should no decision be made then they will receive the default option.

For existing shareholders who require more information about key dates and how the options are broken down, we’ve created a dedicated help and support centre article and will keep this updated as the deal progresses.

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