Royal Dutch Shell cleared the final regulatory hurdle for its takeover of BG Group after receiving the green light from China yesterday, leaving the deal on track for completion by early next year following shareholder votes.
The combination is set to transform Shell into the world’s top liquefied natural gas trader and a major offshore oil producer focused on Brazil’s rapidly developing sub-salt oil basin that would rival ExxonMobil’s position as the world’s biggest international oil company.
The acquisition, worth about US$70 billion when it was announced and the biggest in the sector in a decade, had already received mandatory and unconditional approvals from Australia, Brazil and the EU.
Photo: AFP
Last month, the Chinese Ministry of Commerce pressed Shell to sweeten long-term liquified natural gas supply contracts as the world’s top energy consumer faces a large surfeit over the next five years, sources told reporters.
Since its announcement on April 8, when oil was at about US$55 per barrel, Shell has had to battle a slump in oil prices and investor concerns over the financial merits of the deal in the face of an extended period of weak energy prices.
Heralding a “more resilient and competitive” business, the Anglo-Dutch company slashed the combined group’s planned investment program, highlighted cost savings of US$3.5 billion and announced plans for US$30 billion in asset disposals to pay for the acquisition while maintaining the cherished dividend.
With the regulatory approvals out of the way, Shell and BG turn their focus to shareholders and are set to publish a prospectus containing information on the deal and the change in the share structure and also announce dates for general meetings where the transaction will be put to vote.
“We will now seek approval from both sets of shareholders as we move towards deal completion in early 2016,” Shell chief executive officer Ben van Beurden said in a company statement.
The integration of the two companies has been planned by a joint committee in recent months but could encounter some difficulties as BG’s small and relatively nimble operations are merged with Shell’s much larger structure.
The deal could also result in job cuts where BG’s 5,000 jobs overlap with Shell’s nearly 100,000 employees.
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