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Shell share price: Fund manager boss attacks tie-up with BG

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Jupiter Fund Management exec likens deal to RBS’ purchase of ABN Amro

by Alice Young: Monday, 09 Nov 2015 08:40 GMT

A senior executive at one of the City’s biggest fund managers has attacked Royal Dutch Shell’s (LON:RDSA) proposed takeover of BG Group (LON:BG), The Times has reported. The comments come after the Anglo-Dutch giant’s chief executive moved to reassure investors last week that the tie-up was still compelling despite the increasingly bearish outlook for oil prices.

Shell’s share price has been steady in early morning trading today, having added 0.32 percent to 1,717.50p as of 08:01 GMT, largely in line with gains in the blue-chip FTSE 100 index. BG Group’s share price currently stands 0.15 percent higher at 1,028.50p.

The Times this morning quoted Ian McVeigh, head of governance at Jupiter Fund Management, as likening Shell’s proposed tie-up with its smaller London-listed rival BG to the disastrous purchase of ABN Amro by Royal Bank of Scotland Group (LON:RBS) in 2007, soon before the financial crisis.

“Hugely expensive moves whose main purpose is to rebalance portfolios have a grim history,” McVeigh pointed out. He, however, was speaking on his own account and Jupiter has not expressed an opinion on the deal, which is expected to complete early next year.

“This deal is not big enough to do to Shell what ABN did to RBS, but I think it is still highly material,” McVeigh said, urging the Anglo-Dutch group’s shareholders to “think hard about this deal and be prepared to show Shell that they care greatly how their money is being spent”.

His comments come after Shell’s chief executive Ben van Beurden told investors last week that it now expected the deal to break even with oil prices in the mid-$60s, down from its previous estimate of $70.

“Although oil prices have fallen in 2015 the valuation case for the BG acquisition still looks compelling today for both sets of shareholders,” van Beurden pointed out.

Shell’s shareholders will have the opportunity to vote on the merger once various regulatory hurdles have been cleared, with the exact date yet to be disclosed.

As of 08:41 GMT, Monday, 09 November, Royal Dutch Shell Plc ‘A’ share price is 1,726.00p.

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