Royal Dutch Shell announced on Wednesday that it has agreed to buy the BG Group for nearly $70 billion (£47 billion), therefore becoming a global player in the fast-growing liquefied natural gas (LNG) arena.
BG’s acquisition brings Shell a major presence in deep-water oil and gas production off Brazil. Shell says that with BG it may be able to boost Brazilian production by around tenfold to 550,000 barrels per day of oil and gas.
Once part of British Gas, BG is particularly attractive to Shell as its is a major LNG player, use of which is seeing quick growth despite a recent slump in prices.
The deal would add 25% to Shell’s proven reserves of oil and gas as well as increase production by 20%, owing to BG’s projects in Brazil and Australia, Shell revealed, adding that it expects the deal to yield pretax annual savings of about $2.5 billion.
The Dutch company said it would finance the acquisition through a mix of cash and stock, with BG shareholders receiving 383 pence a share in cash, and 0.4454 B shares in Shell for each BG share held. BG shareholders would own 19% of the combined company, according to Shell.
The price is a 50% premium to BG’s closing share price on Tuesday. BG shares have retreated by nearly 30% since global oil prices started their steep decline back in June.
“Bold, strategic moves shape our industry, [and] BG and Shell are a great fit,” said Shell CEO Ben van Beurden.
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