Shell’s proposed £47 billion acquisition of BG Group is an energy
transaction on a scale not seen since Chevron’s acquisition of Texaco in 2000
for a reported US$45 billion.
The transaction will require merger clearance in a number of
jurisdictions including the EU, Australia, Brazil and China.
The merger will increase Shell’s proven oil and gas reserves by
25% and its oil and gas production by about 20%. It will also expand the
company’s position in the supply of LNG and in Asia and the Atlantic Basin and
has been claimed by the parties as pivotal to their financial growth strategy.
Increasing consolidation in the sector seems almost inevitable
against falling oil prices. After a lack-lustre M&A environment
of recent years the antitrust authorities are facing an increasing workload as
further consolidation takes place in the industry. In addition to
consolidation amongst the major producers consolidation is also taking place
among suppliers and services providers to the oil and gas industry. For
example, the US Department of Justice is currently reviewing
Halliburton’s US$34.6 billion acquisition of its drilling competitor Baker
Hughes.
The Shell/ BG tie-up is expected to close in the second half of
2016. In the ensuing months, it will be interesting to see how the
existing industry landscape is redefined and whether other mergers will follow
in the wake of announcement of this mega-deal.
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