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Royal Dutch Shell Will Acquire BG Group for $70 Billion - Stocks in the News

On Wednesday, it was announced that Royal Dutch Shell Plc will acquire BG Group Plc for £47 billion, or roughly $70 billion in cash and shares. By combining Europe's largest oil explorer according to market vale with the No. 3 U.K.-based energy producer, the deal will be the biggest the oil and gas industries have seen in nearly a decade.

The merging of Shell and BG is a significant response to the decline in oil prices , meaning it could be a catalyst for future acquisitions as the biggest energy companies look to cut costs and rebuild profits.

From a monetary point of view, Shell will pay 383 pence in cash and 0.4454 of its Class-B shares for each BG share. This is equal to approximately 1,367 pence a share, which will place BG's value at about £47 billion, a premium of nearly 50% on BG's closing market price on Tuesday.

The new company will possess an impressive market value that is twice the size of London-based BP Plc and will even surpass Chevron Corp ( CVX ). Shell's CEO Ben van Beurden will lead the combined company.

With this merger, Shell's oil and natural gas reserves will grow by 28%. They will also come into a management team that is known for their role in carving out a unique position in the production of liquefied natural gas, or LNG. The new company, then, will be the biggest manufacturer of LNG among international oil companies, an important feat due to the rising value of LNG for emerging economies seeking cleaner energy sources.

Shell was advised by Bank of America Merrill Lynch. BG worked with Goldman Sachs Group Inc and Robey Warshaw LLP.

Thanks to a report by Bloomberg, Shell's B shares, the class of stock which is being used to finance the acquisition, fell as much as 6.9% in London. The company's A shares dropped 3.9%. In contrast, BG shares soared as high as 43% to 1,300 pence.

(Revised).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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