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£106m fees bonanza from Shell’s £36bn takeover of BG Group

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David Cumming, head of equities at Standard Life Investments, has criticised the deal and urged Shell chief executive Ben van Beurden to pay the £500million break fee to scrap it or renegotiate terms. 

By LAURA CHESTERS FOR THE DAILY MAIL: Wed 23 Dec 2015

Investment bankers and advisers will cash in on a multi-million-pound fee bonanza from Royal Dutch Shell’s £36billion takeover of BG Group.

Documents published yesterday revealed that £106millio in fees will be shared by advisors including Bank of America Merrill Lynch, Goldman Sachs and Rothschild.

The deal split the City after tumbling oil prices raised concerns it was too expensive and could affect Shell’s ability to pay a dividend.

Oil is at 11-year lows of around $36 a barrel – having tumbled from highs of $115 in June last year – caused by higher production of US shale, coupled with the fact that Opec members are maintaining their output in the face of reduced demand.

Shell made its approach in April when oil was at around $55.

However, a number of key investors now back the deal, which is expected to win approval at shareholder meetings at the end of January and complete on February 15.

Ben Ritchie, senior investment manager for equities at fund manager Aberdeen Asset Management, said: ‘We are supportive. It has strategic logic. 

‘The deal of course needs higher oil prices in the long term. But it is a long term deal. It is not unreasonable to expect oil prices to be higher in the medium term over the next 18 to 24 months.

‘If this had been done when oil was $115 then it would look very silly now.’ 

Ritchie also dismissed concerns that it would hit Shell’s dividend, adding: ‘It is not obvious that doing this deal puts the dividend at risk. In fact it could enhance it and support a growing dividend.’

It is thought Aberdeen, which owns 1.8 per cent of both Shell and BG, is in a group of investors that hold 10 per cent of the stock and back the deal.

They include Richard Buxton, chief executive at Old Mutual Global Investors, the Qatar Investment Authority, Allianz Global Investors and Henderson.

But David Cumming, head of equities at Standard Life Investments, has criticised the deal and urged Shell chief executive Ben van Beurden to pay the £500million break fee to scrap it or renegotiate terms. 

Shell needs 50 per cent of shareholders to get the go-ahead, and 75 per cent of BG investors.

Due to weakening share prices, the value of the deal has reduced from nearly £50billion to below £40billion.

BG said its chief executive Helge Lund and chief financial officer Simon Lowth will leave the group after the deal is concluded. 

The documents also revealed Lund has waived a third of his long-term share awards. He came under fire last year when it emerged his pay and perks package could reach as much £28million.

Shell yesterday announced plans to cut expenditure next year by £1.35billion to £22billion for the combined group. 

It said this month it would axe 2,800 staff from the combined Shell and BG workforce, having already warned of 7,500 job cuts.

Separately, credit agency Moody’s has downgraded the debt of Tullow Oil due to the lower oil price.

SOURCE 

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