BG Group share price skyrockets as company backs £47bn tie-up with Shell

Shares in BG Group Plc (LON:BG) have leaped more than 40 percent in early morning trade after the blue-chip company backed a £47 billion tie-up with its bigger FTSE 100 peer Royal Dutch Shell Plc (LON:RDSA). As of 08:10 BST, BG Group’s share price had soared 39.16 percent to 1,266.87p, nearing Shell’s offer price of 1,350p. Shell’s shares, however, have lost ground with the company’s ‘A’ shares currently trading 2.13 percent lower at 2,049.50p. Shell’s ‘B’ shares, trading under the ticker “LON:RDSB” currently stand 4.28 percent lower at 2,114.00p.

BG Group and Shell announced in a statement this morning that they had agreed the terms of a recommended cash and share offer to be made by the Anglo-Dutch energy giant for the entire issued capital of BG Group. Under the terms of the proposed deal, BG shareholders will receive 383p per share in cash, plus 0.4454 B shares in Shell, equivalent to 1,350p per BG share based on 90-day trading volumes. The price marks a premium of around 50 percent to BG’s closing price yesterday and values the smaller company at £47 billion.
On the Shell conference call, the Anglo-Dutch energy giant’s chief executive Ben van Beurden noted that the proposed acquisition would enhance earnings from 2017. The Times quoted van Beurden as noting that BG had always been the “top of the list of prospects”.
“Having two very, very strong portfolios combined in leadership in gas and deepwater has always been logical,” van Beurden added. “What’s happened in the last few months is as well as being logical it’s also become very compelling from a value perspective.”
A person familiar with the matter told the Financial Times that Shell’s bid, which was first reported by the Wall Street Journal, had been unsolicited, and BG had not been put up for sale. Helge Lund, the former Statoil chief executive who took the helm at BG earlier this year, had been installed as chief executive to turn round the company, which has been hit by a series of profit warnings, significant problems at its Egyptian operation, as well as leadership crisis in the wake of Chris Finlayson’s departure last year.
As of 08:55 BST, Wednesday, 08 April, BG Group plc share price is 910.40p.