Oil price slide unlikely to scuttle Shell's takeover of BG

Thu Dec 17, 2015 1:39am EST
 
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By Ron Bousso, Karolin Schaps and Sinead Cruise

LONDON (Reuters) - Royal Dutch Shell's takeover of BG Group may look less attractive after the slide in oil prices but the fact the same investors own nearly half of both firms means the deal is still likely to go through.

Investors holding about 43 percent of Shell's shares also hold 53 percent of BG, according to Reuters data. For example, Blackrock, Franklin Mutual Advisers and Norges together hold more than 12 percent of Shell and nearly 7.5 percent of BG.

Investors will be voting separately on the deal at meetings expected next month after the takeover received its final regulatory seal from China this week and a rejection of the takeover could entail losses all round, making it more painful for those with shares in both companies.

BG shares would likely collapse, while Shell would lose a rare opportunity to increase its production base over the next few decades by snapping up a smaller company with some key assets, investors and analysts say.

"I think the vote will be positive for the deal," said Niels Lammerts van Bueren, portfolio manager at Dutch arbitrage fund TRZ Funds that trades shares in both companies. "Indeed, with the cross-holdings very few holders will be voting against as that will cost them money."

Few investors and analysts have challenged the strategic sense of a merger that will make Shell the world's top liquefied natural gas (LNG) trader and a key player in Brazil's rapidly developing offshore oil production.

But the 30 percent slump in oil prices to below $40 a barrel since the takeover was announced in April has left investors worrying about whether Shell will be able to maintain its dividend if the $54 billion takeover goes through.

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Shell's company logo is pictured at a gas station in Zurich April 8, 2015. REUTERS/Arnd Wiegmann