Royal Dutch Shell plc agrees deal to takeover BG Group for Nearly...

Royal Dutch Shell plc agrees deal to takeover BG Group for Nearly $70 Billion

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Royal Dutch Shell said on Wednesday that it is going to acquire BG Group in a deal valued at about $70 billion with an aim to further increase scale and profit in two areas, deep water drilling and LNG, in which it is already a global leader.

Not to mention, this company (once part of British Gas) would be attractive to Shell, because it is a major player in liquefied natural gas. Shell, on the other hand, has also invested heavily in the L.N.G. business.

Once the deal is completed, the sale would definitely be a rare bright spot for energy deal makers, as oil and gas companies have largely kneeled down, while petroleum prices jumped up.

As a result, many companies have turned to stock markets for raising cash and bolstering their balance sheets. This calculus would definitely change if Shell and BG merge with each other. Also, a deal of this size could inspire some wavering would-be sellers to pursue deals. Mergers activity are expected to pick up in 2015, mostly once oil prices show more signs of stability, according to advisers.

Since Exxon Mobil’s US$ 31 billion deal for XTO Energy more than five years ago, a deal for BG would be the biggest energy company acquisition. The company’s largest acquisition to date was its purchase of a 22% stake in Shell Canada that it did not already own for about US$7 billion. Shell had US$21.6 billion in cash, along with short-term investments on hand as of last year’s end.

BG reported a US$1.1 billion loss in 2014, mainly because of write-offs as a result of lower oil and gas prices. Unfortunately, BG has also experienced leadership turmoil; the company’s chief executive, Chris Finlayson, resigned suddenly last year, upon which he was replaced in February, after an interregnum, by Helge Lund.

In 2014, the company also reported income of about US$15 billion, a decline of about 8% compared with a year earlier.

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I cover technology, utilities and biotechnology for Markets Morning, and I help out occasionally with other industry sectors. I've written about investment and personal finance topics for more than 20 years from a lowly copywriter to editor-in-chief, so I've done a little bit of everything. For what it's worth, I have a BA from Duke University and an MBA from Rollins College. I'm married with one daughter, and that's worth more than everything else put together.

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