Royal Dutch Shell said it has agreed to buy BG Group for £47bn in a bid to close the gap on the world’s biggest oil major, U.S. ExxonMobil.
In a joint statement, the two firms said that as part of the recommended deal Shell would pay a mix of cash and shares that would value each BG share at around 1,350p. It said this represented a premium of around 52 percent to the 90-day trading average.
The deal, which should generate pre-tax synergies of around £2.5bn per year, will result in BG shareholders owning around 19 percent of the combined group.
Setting out its longer-term thinking, the two groups said Shell would pay a dividend of $1.88 per ordinary share in 2015 and at least the same amount in 2016.
Jorma Ollila, chairman of Shell, said: “This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders. The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world.
“BG shareholders will receive significant value through the premium being offered for their shares. They will become shareholders in Shell, accessing an attractive dividend policy, a share in the significant synergies and the compelling upside and enhanced operating capability of the combined group.”
Anglo-Dutch Shell also expects to start a share buyback programme in 2017 of at least $25 billion for the period 2017 to 2020.
Shell said the deal would boost its proved oil and gas reserves by 25 per cent, and give it better prospects in new projects, particularly in Australia LNG and Brazil deep water.
Shell also said it planned to increase asset sales to $30bn between 2016-2018 on the back of the deal. The company said in January it was selling $5-6bn worth of assets per year.