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Shell Gets Unconditional China Approval for $70B BG Buyout

Europe's largest oil company Royal Dutch Shell plcRDS.A has received the unconditional clearance from China to proceed with its acquisition of BG Group plc − a leading upstream energy player in the UK. The permission clears the final regulatory obstacle that was in the path of Shell's BG buyout.

Shell had announced its purchase deal with BG Group plc in the first half of this year. Per the agreement, Shell is expected to acquire BG Group for a total consideration of $70 billion - including both cash and equity payments. This is the biggest merger in the energy space in a decade.

Following the green signal from China, the only thing that is left is the approval of shareholders after which the deal will likely be closed by early 2016. However, after getting the Chinese authorization, Shell added its intention to reduce global headcount by 2,800 from the merged entity.

Many analysts are anticipating the total value of the combined company to be more than $296 billion. Hence, with the transaction, Shell - currently with market capitalization of $139.51 billion - will get closer to the world's largest publicly traded oil company, Exxon Mobil Corporation XOM , which is currently valued at $316.51 billion.

Moreover, some analysts believe that, in terms of market value, the new company will be twice the size of London-based BP plc BP and even surpass Chevron Corp CVX .

Shell is an integrated energy firm with a strong and diversified portfolio of development projects that offer attractive long-term opportunities. Predictably, the oil price slump has affected Royal Dutch Shell's earnings and cash flows, particularly at its upstream unit. Furthermore, lost reserves/production from the group's asset sales in Nigeria and heightened risk related to the company's remaining operations in the country cannot be ignored either.

As a result, the company currently carries a Zacks Rank #4 (Sell), implying that it will underperform the broader U.S. equity market over the next one to three months.

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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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