Responding to media reports, British oil and gas company BG Group Plc. (BG.L,BRGYY.PK) confirmed that it is in advanced talks regarding a possible takeover bid for the company by European oil giant Royal Dutch Shell plc (RDS-B, RDSB.L, RDSA.L,RDS-A).
BG Group said that while there was no certainty that any offer will ultimately be made by Shell, it will make a further announcement shortly. The company noted that Shell must either announce a firm intention to make an offer for it or announce that it does not intend to make an offer by May 5, 2015.
BG Group has a market capitalization of about $47 billion, while Shell has a market capitalization of about $195 billion. According to the Wall Street Journal, a deal for BG with a typical takeover premium would likely be valued at more than $50 billion.
A potential merger would come as the two European companies, like others in the industry, grapple with lower revenues amid the recent fall in crude oil prices.
The WSJ reported that an acquisition of BG Group will give Shell access to BG Group's offshore Brazilian assets, undeveloped gas resources in East Africa and a huge LNG project in Australia ramping up this year. Meanwhile, Shell has scaled down plans to become a major producer of shale gas.
In March, BG Group reportedly a sharply wider pretax loss for the fourth quarter to $8.33 billion from $1.58 billion a year ago, reflecting a hefty impairment charge.
BG Group noted that the sharp deterioration in commodity prices in the second half of the year led it to recognize significant asset impairment charges in the fourth quarter. The company also said it will continue to add further production in 2015 from Brazil and Australia.
In late January, Shell reported a 57 percent decline in profit for the fourth quarter amid lower revenues reflecting the sharp decline in oil prices. Income attributable to the company's shareholders plunged to $773 million or $0.12 per share from $1.78 billion or $0.28 per share in the previous year.
At that time, Shell said that its organic capital investment in 2015 is expected to be lower than in 2014. Shell has curtailed over $15 billion of potential spending over the next three years.
Media reports in late March indicated that Shell plans to cut another 250 jobs in its UK North Sea operations, which come on top of the 250 positions eliminated by the company last summer from its U.K. operations.
BRGYY closed Tuesday's trading at $13.58, up $0.73 or 5.68 percent on a volume of 161,628 shares.
RDS-A closed Tuesday's trading at $61.95, up $0.45 or 0.73 percent on a volume of 2.44 million shares.
For comments and feedback contact: editorial@rttnews.com
Business News