The Royal Dutch Shell Plc Chief Executive Officer, Ben van Beurden, has said that the motivation to acquire BG Group Plc was to speed up its growth strategy in global liquefied natural gas market and deep water operations.
Mr. Beurden said the planned acquisition would provide Shell with enhanced capacity to be competitive in new oil and gas projects, particularly in Australia LNG and Brazil deep water.
The board of Shell on Wednesday announced its decision to acquire BG Group Plc, with terms already agreed between the boards of the two companies.
The value of the proposed acquisition put at almost $70 billion, would see Shell paying with 70 per cent of its own shares and 30 per cent in cash.
The acquisition, which would see BG shareholders own approximately 19 per cent of the combined Group equity, is expected to add about 25 per cent capacity to Shell’s proven oil and gas reserves and 20 per cent of production based on 2014 operational data.
The combined portfolio of the two multinational giants, Mr. Beurden said, has the potential to unlock further value for their respective investors and enhance their capacities increased asset sales and reduce capital investment.
Mr. Beurden said Shell expects that their coming together would help generate pre-tax earnings of approximately $2.5 billion annually.
From 2017, the Shell boss said the company would commence a share buyback programme for at least $25 billion that would continue till 2020, to offset the shares issued under the Shell scrip dividend programme and significantly reduce the equity issued in connection with the acquisition.
“We believe that the combination is in the interests of both our companies and their Shareholders,” Chairman of Shell, Jorma Ollila, said.
Mr. Beurden, who described the acquisition of BG as a bold and strategic move, said BG and Shell were a great fit in their overall growth strategy.
He said at the start of 2014, Shell embarked on an improvement programme, including divestments and restructuring of under-performing businesses, while delivering profitable new projects for shareholders.
“BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell’s growth priorities and areas where the company is already one of the industry leaders,” Mr. Beurden said.
The addition of BG’s competitive natural gas positions, the Shell boss said would strengthen the long-term growth in demand for liquefied natural gas as the cleaner-burning fuel.
For Chairman of BG, Andrew Gould, the coming together of the two companies represents an attractive return for BG shareholders, in terms of building a strong portfolio of operations, including growth assets in Australia and Brazil and a highly competitive LNG business as well as an enviable track record of exploration success.
Shell projections, Mr. Beurden said, are that by 2020, the combined Group capacity would result in businesses growth in deep water and integrated gas, with the potential for each portfolio to generate and average $15 to $20 billion of cash flow from operations per annum.
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