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Shell upbeat on BG buyout even as oil price falls as shareholder advisory group Glass Lewis is said to be in favour of the deal

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But some investors are concerned over the plunging oil price and late last week Standard Life Investments said it would be voting against the deal.

By JON REES, FINANCIAL MAIL ON SUNDAY: 10 JAN 2016

Shell’s £36billion offer for rival BG Group has received a boost after shareholder advisory group Glass Lewis is understood to have come out in favour ahead of the investors’ vote later this month.

Glass Lewis is the leading adviser for US shareholders and nearly a third of Shell’s investors and a quarter of BG’s are US-based. The deal has also won the backing of the other leading shareholder advisory group ISS last week. 

But some investors are concerned over the plunging oil price and late last week Standard Life Investments said it would be voting against the deal. Announced in April last year, it saw Shell offer a 50 per cent premium to BG shares at 1350p a share, made up of 383p in cash and 0.44 of a Shell share for each BG share.

Both BG and Shell’s shares have tumbled since the announcement, after the price of oil fell from more than $65 a barrel to $33.30. 

News that Saudi Arabia is considering floating Aramco, the world’s biggest oil firm, is also seen as a sign that the future of oil businesses may be in doubt in the long term, with suggestions that the kingdom was cashing in while it could.

Since the offer was made, Shell’s share price has fallen from 2208½p to 1391p, meaning it must pay a bigger proportion in cash, leading to fears that its investors may baulk at the deal. Shell must get the backing of the majority of its investors and 75 per cent of BG’s.

BG shares are trading at 942½p a share.

Shareholders backing the deal cite the long-term benefit to Shell in acquiring a business strong in gas production, amid expectations that the price of fossil fuel will rise eventually.

‘We think it’s okay in the long term,’ said one top ten investor, ‘and it’s difficult to see how they can reduce the price.’ If Shell did try to alter the terms, under City rules the present deal would lapse, allowing a rival bid to emerge.

Shell shareholders will vote on January 27, with BG investors voting the next day. Shell chief executive Ben van Beurden is speaking to shareholders this week.

Read more: http://www.thisismoney.co.uk/money/markets/article-3391927/Shell-upbeat-BG-buyout-oil-price-falls-Glass-Lewis-said-favour-deal.html#ixzz3wr19ofaT

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