Shell’s Takeover of BG to Go Through Despite Low Oil Price

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.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza