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Authorities likely to wave through a Shell BP merger

Screen Shot 2014-10-28 at 12.29.57EXTRACTS FROM A FORBES.COM ARTICLE BY TIM WORSTALL PUBLISHED 6 DECEMBER 2014

If Royal Dutch Shell Buys BP Should The Authorities Ban The Purchase?

There’s interesting (and fun!) rumors floating around the London market that Royal Dutch Shell might attempt to purchase BP. These sorts of mergers (or takeovers) aren’t unusual in a commodity business like oil at a time of weak prices.

Here’s the story swirling around:

One of Britain’s oldest oil companies BP could be about to be sold to its biggest rival for a fiver per share.

The rumoured deal, if realised, would complete one of the most ignominious falls for the once great Persian Oil company that powered Britain’s Navy to victory during the First World War.

BP is now a sitting duck after the Gulf of Mexico disaster, Russian sanctions and the falling oil price combined to drive down the share price to £4.25. Analysts estimate the deal could be done if rival Shell offers a 16pc premium to that price, or about £5, to seal one of the biggest corporate takeovers in the history of the oil industry.

The rumours that surfaced earlier this week that Shell might be taking a closer look at BP are not that ridiculous and in the current climate of lower oil prices and falling profits they actually make perfect sense.

Of course, this is all only rumor so far: at least some of the talk coming from the bankers who would love to collect the fees for advising on a deal of such scale. But assume that it does progress, how much would the idea be in danger of being stopped on those anti-trust grounds? That really depends upon how the regulators define the market. There would most certainly be conditions applied to certain local markets, as above, but the basic deal itself would likely be waved through.

FULL ARTICLE

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