Sources claim BG merger could be okayed by year-end

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by Veselin Valchev: Monday, 30 Nov 2015, 10:13 GMT

Royal Dutch Shell Plc (LON:RDSA) is on track to settle all mandatory regulatory approvals for the proposed merger with smaller rival BG Group before the end of the year, paving the way for the final shareholder verdict.

According to sources close to the negotiations, both the Australian Investment Review Board and China’s ministry of commerce, whose approvals are mandatory for the deal to go through, are expected to give the thumbs-up before Christmas.

Shell chief executive Ben van Beurden has reportedly had direct meetings with the head of China’s ministry of commerce, Gao Hucheng. Shell has put forward remedy proposals, sources claimed, in response to competition concerns from Beijing.

“We are working positively with Mofcom and are hopeful of a positive decision, but it is up to them to decide and we expect they will carry out a thorough and professional review,” Shell said as quoted by The Telegraph.

Earlier this month, speculation emerged that Shell might have to offer substantial long-term concessions in order to win over backing for the mega-merger from China.

Approval from Beijing and Australia would leave the deal in the hands of shareholders at the two companies. The tie-up needs 50.1 percent of Shell investors and 75 percent of BG’s shareholders to vote in favour.

Concerns have surfaced in recent weeks that some major shareholders might have reservations towards the deal. Notably, the Qatar Investment Authority (QIA), one of Shell’s top 20 shareholders, sold-down substantial chunks of its holdings in both Shell and BG Group, though the fund was later said to be “fully supportive” of the merger.

Separately, Shell has reportedly met four of its top US investors, including Fidelity and Franklin, in the past few weeks in an effort to soothe any jitters. The Hague-based company is confident that shareholders will vote the deal through because 18 of its top 20 fund managers also hold BG shares.

Shell recently told investors that the BG tie-up continues to be ‘compelling’ for both sets of shareholders, despite an increasingly bearish outlook for oil.

“The benefits (of the acquisition) come from delivery of growth projects which will deliver cash flows not over 6 months or 12 months, but over 15-20 years, that’s the real value,” Shell chief financial officer Simon Henry said earlier this month.

The Anglo-Dutch oil major maintains that the deal is on course to be completed by early 2016.

Shell’s share price had shed 0.88 percent to 1,642.00p as of 09:54 GMT today, slightly underperforming the FTSE 100 which had dropped 0.3 percent. Year-to-date, Shell’s stock is down some 24 percent.

As of 10:16 GMT, Monday, 30 November, Royal Dutch Shell Plc ‘A’ share price is 1,643.75p.

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