BG Group Share Discussion Threads

[nigelpm] 09/4/2015 11:40

At least they can take the money and run but the sad thing is the company and its excellent prospects have gone.

Fall in the price of oil has caused this and there is no way the board could ignore a bid of this magnitude!

[kibes] 09/4/2015 11:22

As a former BG employee I find this deal sickening. One of the UK's major success stories bites the dust to be taken over by the ponderous dead hand of Shell. Helge Lund the new CEO walks away with £32 million having hardly started (although to be fair its not his fault). BG shares would very probably have gone a lot higher in due course whereas Shell shares are going nowhere, saddled with a high dividend they won't be able to keep up. Current BG shareholders appear to be thrilled with the quick price rise but the future has gone. At least they can take the money and run but the sad thing is the company and its excellent prospects have gone.

[silverballs] 08/4/2015 20:45

It would seem that someone with a deeper pocket than Shell will scoop the prize here

[spob] 08/4/2015 17:42

Shell’s takeover of BG — what the analysts say


FT

Kadhim Shubber


8 April 2015


Royal Dutch Shell’s £47bn deal to acquire BG Group at a hefty premium has prompted industry analysts to herald a new round of consolidation in the energy sector, following the collapse in the oil price.

However, some have questioned the assumed recovery in the oil price used to underpin the valuation methodology, and suggested it is a better deal for shareholders in BG than in Shell.


Here is a selection of analyst comments.


Neil Morton, Investec

“Shell’s bid for BG Group is proof that if you repeat a rumour long enough, it might eventually come true. A tie-up has been mooted for about 20 years. BG investors receive what we see as a compelling offer. For Shell shareholders, we are less convinced of the merits. The deal is predicated on a strong recovery in oil prices ($90/bl from 2018), while we suspect that Shell is pouncing on BG’s imminent free cash flow to protect its burdensome dividend payout.

“Shell is arguing that BG’s prize assets in deepwater Brazil (where Shell has limited presence) and LNG in Australia (where Shell arguably is overexposed) will augment its quality and cash generation. However we suspect that, with BG on the cusp (finally!) of FCF generation and a new chief executive settling in, Shell thought the timing propitious.

“BG has struggled to shake off the perception that in developing Brazil and Australia it bit off more than it could chew. New chief executive, Helge Lund, (or, perhaps more likely, chairman Andrew Gould) has accepted that BG’s asset base is more suited to a company with deeper pockets.”


Stephane G. Foucaud, FirstEnergy

“The premium is very large which highlights the value that the industry sees in the sector. I would not be surprised if we see other super majors and majors following Shell moves and also going for acquisitions. This is usually what happened in the past. Once one of the big players pulls the triggers, then the others (BP, Total, Chevron and ExxonMobil) follow suit. They are likely to look for materiality with large independents as target.

“Shell’s acquisition of BG is big on Asian gas because it [east Africa and Australia] fits its portfolio. It does not mean that Asian gas would also be the focus for the other large companies. I personally believe that North American shale could also be an area of focus for a targeted acquisition.”


Philip Barker, partner at Cavendish Corporate Finance

“This deal could signal the start of a spate of further mega deals and a similarly sweeping reordering of the international oil and gas industry. Following a spate of largely tax-driven mega deals last year, it’s good to see that the biggest takeover by far this year has a compelling commercial logic. BG’s deep water positions and strengths in LNG shipping and marketing combine well with Shell’s scale and financial strength.

“For Shell it’s also a cheaper way of increasing its reserves, while for BG Group fundamentally it’s probably as much about strategy as survival. With its share price down 30% over the past year and a $9bn writedown of its oil and gas assets last month there was a clear rationale for the company to find a stronger financial partner.”


Biraj Borkhataria, RBC Capital Markets

“The key attractions for Shell are BG’s deepwater assets in Brazil and its LNG portfolio. BG’s LNG portfolio combined with Shell’s would represent circa 40m tons per annum or roughly 16 per cent of the global LNG market, further propelling Shell’s position as a leader in this area.

“In addition, Shell would acquire significant growth options including Tanzania and Lake Charles LNG. In Brazil, BG’s assets would give Shell a further foothold in one of the lowest cost basins in the world, and could add potential synergies with Shell’s Libra assets.”


Michael J Alsford, Citi

“We have long believed that BG’s portfolio has offered low-cost growth, primarily from Brazil. Brazil will represent around 60 per cent of BG’s upstream cash flows by 2020.

“The LNG portfolio fits into the wider Shell portfolio — in addition to its material position in Brazil, BG has a material LNG business including .201;. . QC LNG in Australia, which should fit well into Shell’s LNG business and enable Shell to monetise its own unconventional gas resources in Australia.”


Augustin Eden, Accendo Markets

“Royal Dutch Shell is to purchase BG Group for about £47bn in cash, which would be the 14th largest M&A transaction in history, indicating the likelihood of another oil & gas M&A party like the one seen in the late 1990s.”

[spob] 08/4/2015 17:28

Shell strikes £47bn agreed takeover of BG


FT

8 April 2015


Royal Dutch Shell is to buy BG Group in the energy industry’s biggest deal in more than a decade, paying £47bn ($70bn) for the equity of its rival.

The transaction is the oil sector’s most dramatic response so far to the slide in crude prices, which have slumped 50 per cent since last June, and could usher in further consolidation across the industry as companies scramble to cut costs.


More

On this story

Lex Shell and BG — shelling out
Shell chief pulls off audacious move
Nick Butler Who’s next in energy M&A?
Analysis ExxonMobil keen to join oil M&A party
Lombard BG’s Lund joins the footnote guys

On this topic

Shell and BG deal — what the analysts say
Five questions for Shell over BG deal
Fast FT BG shares rise 42% after Shell offer
Shell in talks with BG over £46bn deal


The deal will increase Shell’s oil and gas reserves by a quarter and its production by 20 per cent. Analysts say it could put the company on track to surpass ExxonMobil as the world’s largest non-state oil company by output.

Acquiring BG will also turn Shell into the largest foreign oil company in Brazil, one of the world’s richest and most exciting oil provinces, and strengthen its position as the largest producer of liquefied natural gas among the global majors.

BG shares were 28 per cent higher £11.69 in afternoon trading in London. Shell’s B shares were down almost 8 per cent at £20.33 with some analysts suggesting Shell may have paid a steep price for its rival.

However, Ben van Beurden, Shell’s chief executive, said the deal represented an “incredibly exciting moment” for the Anglo-Dutch major, which has struggled in recent years to boost production and increase its reserves.

He said Shell had long had its eye on BG but the recent fall in the oil price, which has dragged down the valuations of all the main energy groups, made a deal ”very compelling from a value perspective”. BG’s share price had fallen 28 per cent between last June and the announcement of Wednesday’s deal.

Shell will pay BG shareholders 383p a share in cash, plus 0.4454 B shares in Shell. That is equivalent to £13.50p a BG share and values BG’s equity at about £47bn. It is a premium of about 50 per cent based on 90-day trading volumes.

BG recorded net debt of £8bn at its last results, putting a total enterprise value on the deal of almost £55bn.

Some Shell shareholders cautioned that by acquiring BG, Shell would be taking on some potentially troubled assets, particularly in Brazil and Australia, where projects have been hit by cost overruns and delays.

Matthew Beesley, head of global equities at Henderson Global Investors, which owns shares in Shell and BG, said: “Shell is taking on more risk and in issuing more shares and paying out cash to BG shareholders.

“As a result, their balance sheet will become more stretched. This potentially puts some strain on [Shell’s] dividend as they redirect cash flows to paying down debt ahead of growing the dividend.”

However, Michael Clark, portfolio manager of Fidelity MoneyBuilder Dividend Fund, a big investor in Shell and BG, stressed it was a good deal for both sets of shareholders. “There is no danger that Shell will change its dividend policy,” he said. Indeed, the company confirmed it would maintain its current payout of $1.88 per ordinary share in 2015 and pay “at least that amount” in 2016.

Since the price of crude began to slide last year, expectations have been high that the oil sector could see a repetition of the mergers and acquisitions fever that reconfigured the industry in the late 1990s — another period of low oil prices — that created the current crop of big oil companies such as BP, Chevron and ExxonMobil.

Some significant deals have already materialised since oil began to drop. Halliburton, the oil services group, recently bought rival Baker Hughes for $35bn and Repsol of Spain late last year acquired Talisman Energy of Canada for $8.3bn. Rex Tillerson, chief executive of ExxonMobil, said last month the company could be open to a large deal.

Mr van Beurden said the acquisition of BG would deliver a significant uplift in free cash flow, which would enable Shell to launch a $25bn share buyback programme in the 2017-20 time period. The combined company would also divest $30bn of assets over 2016-18. That comes on top of the $15bn worth of assets Shell disposed of in 2014.

Shell is paying a lot for BG, on the assumption of higher oil prices

The fact that the offer is in cash and shares, Mr van Beurden said, meant BG shareholders will remain exposed to the assets “and all the upside when oil prices go up again”.

Shell was advised by Bank of America Merrill Lynch. BG was advised by Goldman Sachs and Robey Warshaw.

Mr van Beurden first broached the deal in a March 15 call to Andrew Gould, BG’s chairman, who used to be chief executive of oil services company Schlumberger. “I called [him] up and we had a very good and constructive discussion,” the Shell CEO said.

Combining with BG chimes in with Shell’s long-held focus on two business segments — “integrated gas”, which involves producing, processing and exporting natural gas, and deepwater oil and gas production. Mr van Beurden said the BG deal would be a “much enlarged version of what we did with Repsol”, the Spanish oil company that sold its LNG business to Shell in 2013.

Shell said it would pay down debt from 2016 when the deal is expected to become accretive to cash flow. It said it would be “mildly accretive” to earnings per share in 2017, and “strongly̶1; thereafter.

Mr van Beurden said the capital expenditure of both companies was $42bn in 2015, but “we will aim to get it below $40bn next year” and even less than that in 2017.

“With a much better defined set of options, we will be able to manage capital discipline with much higher precision,” he said. But he insisted that the combined company would continue to spend heavily in the UK North Sea, investing £4bn for growth in the 2016-18 time period.

Mr van Beurden acknowledged that Shell would face questions from competition authorities in Australia, Brazil, China and Brussels, but so far it had not identified any “insurmountable issues”. He said the company did not anticipate having to sell down assets for antitrust reasons.

The deal comes at a time when BG is recovering from a tumultuous few years marked by operational problems, profit warnings and management upheaval. Its long-serving chief executive Sir Frank Chapman was replaced in 2013 by Chris Finlayson who lasted only 16 months in the job. He was temporarily replaced by Mr Gould, until Helge Lund, former boss of Norwegian state oil major Statoil, took the helm in February. He will oversee the transition, and ”then will probably move along”, Mr Gould said.

In an interview on Wednesday, Mr Lund acknowledged he had “mixed emotions” about Shell’s bid. “I came to BG to turn it around,” he said. “I came to build a company, not to sell it.”


Key points of the deal

● Deal valued at £47bn, 52% premium to 90-day average price

● BG shareholders receive per share: 383p cash, 0.4454 Shell B shares

● BG shareholders to own 19% of combined company

● Adds 25% to Shell’s proved oil and gas reserves

● Adds 20% to its production

● Annual pre-tax savings of $2.5bn

● Dividend of $1.88 a share

● $25bn buyback 2017-20

● Seeking clearance from competition regulators in UK, EU, China, Brazil and Australia

● BG directors unanimously recommend the deal

● Deal expected to be completed early 2016

● Shell expects asset sales to total $30bn in 2016-18


Reporting by Claer Barrett, Guy Chazan, Arash Massoudi and David Oakley in London

[demo trader] 08/4/2015 16:46

and US CRUDE down over 4%

[bookbroker] 08/4/2015 16:38

Heavy dilution on the new Shell shares makes this not such a good deal, Shell states it's compelling, but they are going to run hard to make this look a good deal!

[careful] 08/4/2015 16:12

with Shell falling and most of the deal in shares this is not looking so generous.

[supermarky] 08/4/2015 15:47

Glad I sold first thing

[maximillian1] 08/4/2015 15:39

Maybe they want another bidder in the ring ...£15+

[withoutt] 08/4/2015 15:20

Why the big sell off?

[maximillian1] 08/4/2015 14:26

The old saying..."strike while the iron is hot comes to mind.."

[woolybanana] 08/4/2015 12:51

Thanks you guys, you comments are much appreciated. I will do a bit more cogitating.

[essentialinvestor] 08/4/2015 12:33

wooly, as Pierre has commented no one here can give you a definite answer
and it also depends on whether you need to realise funds in the short term
for the person concerned.

I think spob has given some clear guidelines with his posts this morning imv.

[demo trader] 08/4/2015 12:27

3rd DECEMBER 2014

Dealers once again heard that BG’s independence will be threatened before Lund can get his feet under the table early next year. Shares of the perennial takeover favourite and oil and gas giant touched 937p before closing 30.9p better at 935.5p, amid talk of a £47.7bn or £14 a share break-up bid from Exxon Mobil.

[pierre oreilly] 08/4/2015 12:23

no one knows. It could go up more, or down to where it came from. Depends what happens, no one knows. The safest thing to do is sell imv - you've done exceptionally well in the last 24 hours! Main risk is regulatory imv. But really, anyone's opinion is pretty worthless atm. And if it's a tiny number, does it matter anyway?

[woolybanana] 08/4/2015 11:47

Could some kind soul give me a little help please? I hold power of attorney over a small share portfolio which includes a tiny number of BG shares bought at about 1256p. What is the best option in the light of the takeover, the aim being to get the best value for the elderly person who actually owns the shares?
On present numbers they might or might not break even or come out ahead by a nose, but I think that is a bit variable. Is it best to buy more shares and add them to the existing holding to average them, or wait and then buy more or simply to do nothing for the moment or just accept the deal as it stands eventually?
I dont want advice, just opinions in case anyone thinks they might be inhibited by the former word.
Many thanks in advance.

[revell40] 08/4/2015 11:44

do you all think sell now or wait ta

[bionicdog] 08/4/2015 11:19

Re 1587
Why would they?

[demo trader] 08/4/2015 11:14

Then again.........There may be another HIGHER offer for BG from EXXON.

[supermarky] 08/4/2015 11:11

That's what I'm looking to do demo. Just wanting rdsb 2000 though lol

[demo trader] 08/4/2015 10:57

Better to switch in RDSB from BG., IMO.

[spob] 08/4/2015 10:42

If you include net debt and the pension deficit

The cost for Shell is 1588p per BG share


can't knock shell for that

a very fair offer given the depressed oil price

[fastforwarduk] 08/4/2015 10:19

Thanks spob, it was a fortunate recent buy, it looked cheap and Fool were tipping it. Assuming no issues with the regulatory and that oil doesn't fall any lower this seems good to stay at this level or above

[spob] 08/4/2015 10:14

FFUK

3 factors

1. Regulatory approval
2. Shell share price (0.4454 x RDSB ) + 383p
3. Time - you may wait until next year to get any cash



if RDSB = 2200 offer = 1363p

if RDSB = 2100 offer = 1318p

if RDSB = 2000 offer = 1274p