Royal Dutch Shell Plc agreed to buy BG Group Plc for about 47 billion pounds ($70 billion), making Europe’s largest oil company the pre-eminent player in global natural gas and adding fields in Brazil.
The deal, the industry’s biggest in at least a decade, will push Shell further into producing, shipping and selling gas as the company bets China and other emerging economies switch from coal and oil to cut pollution.
Shell said on Wednesday the deal would boost its proven oil and gas reserves by 25 percent.Investors were skeptical of the stock and cash acquisition, which isn’t expected to boost earnings per share until 2017. The price of the class of share being used to buy BG fell the most since 2008 on concern the company is overpaying.
“To assume that Shell can pay a 50 percent premium for BG, and extract significant synergies, deliver value for shareholders and maintain a dividend on an expanded shareholder base would require a more-than-healthy degree of optimism,” said Michael Hulme, commodities fund manager at Carmignac Gestion SA.
The merged company, led by Shell Chief Executive Officer Ben van Beurden, 56, will boast a market value twice the size of BP Plc and surpass Chevron Corp. Shell, struggling to rebound from its worst production performance in 17 years, will swell its oil and natural gas reserves by 28 percent with the combination and inherit a management team that carved out a unique niche in liquefied natural gas, or LNG.
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