GLOBAL MARKETS-Oil & gas mega-merger keeps stocks fizzing

8 Apr 2015 | Author: | No comments yet »

BG Group Stock Climbed Most Since 2009 Before Merger Report.

LONDON (Reuters) – Royal Dutch Shell said on Wednesday it had agreed to buy BG Group for 47 billion pounds in the first oil super-merger in a decade.Shares of BG Group Plc jumped the most in six years and bullish options volume increased before takeover talks were reported, though analysts said there was too much public speculation about a deal to deem the trading suspicious. In a joint statement, the two firms said that as part of the recommended deal Shell would pay 383 pence in cash and 0.4454 Shell B shares for each BG share.

The offer represents a premium of about 50% compared with BG’s closing share price on Tuesday, costing Shell “approximately £47bn” for its rival, the statement added. “The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world,” Shell chairman Jorma Ollila said in the release. While BG jumped 6.7 percent on Tuesday, the biggest gain since March 2009, the rally came on a day when oil-and-gas companies in the Stoxx Europe 600 Index added 4.2 percent — the most since October 2011. He added: “BG’s deep water positions and strengths in exploration … will combine well with Shell’s scale, development expertise and financial strength.”

The acquisition is a response to the slump in oil prices and could set in motion a series of mergers as the largest energy companies look to cut costs and restore profits. European markets were closed on April 3 and 6 for holidays. “In Europe, speculation is pretty rampant and routine,” Sachin Shah, a special-situations and merger-arbitrage strategist for New York-based Albert Fried & Co., said by phone. “Is there something unusual going on?

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