Royal Dutch Shell has agreed a takeover of oil and gas exploration company BG Group in a deal which values the business at £47bn.
Under the terms of the deal, investors would receive a premium of about 50 per cent on BG’s closing share price of 910.4 pence as at 7 April.
BG shareholders will own around 19 per cent of the enlarged group.
Shell says the deal will boost its oil and gas reserves by 25 per cent and boost production by 20 per cent. The company adds the acquisition of BG, which was spun out of British Gas in 1997, will give Shell the opportunity to take on new oil and gas projects, particularly in Australia and Brazil.
Shell has also pledged to pay a dividend of $1.88 per ordinary share this year and “at least that amount” next year.
It expects the deal to generate cost savings per year of $2.5bn.
Shell chairman Jorma Ollila says: “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.
“We believe the combination is in the interests of both our companies and their shareholders.”
BG chairman Andrew Gould says: “This offer represents an attractive return for BG shareholders.
“BG has a strong portfolio of operations including growth assets in Australia and Brazil and a highly competitive liquefied natural gas business, as well as an enviable track record of exploration success.
“The BG board remains confident in BG’s long-term prospects under the leadership of Helge Lund. Shell’s offer, however, allows us to accelerate and de-risk the delivery of this value. For these reasons, the BG board recommends the offer.”
The oil price has fallen dramatically over recent months with prices dropping by more than 50 per cent in the second half of last year. Shell announced earlier this year it was to decommission its rigs in its Brent field operations.