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Shell-BG merger gains support ahead of vote

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Shell’s business gamble, supported by oil prices at near record highs, is on the brink of paying off Photo: Newscast

By Jillian Ambrose: 21 Jan 2016

Key investment funds have voiced growing support for the planned £47bn merger of energy giants Shell and BG Group ahead of crucial shareholder votes next week.

Shell’s fifth biggest investor, Norges Bank Investment Management, said on Wednesday that it will vote in favour of the plan at the shareholder meeting on January 27.

The $790bn fund joins a growing group of shareholders in support of the deal, including smaller investment funds and investment advisory firms.

A spokeswoman for Norges Bank said: “In an environment of low oil prices, we believe the companies will stand stronger together.”

Oil prices have hit 12-year lows this week and Shell warned in its latest financial report that its earnings for the last quarter would tumble 40pc compared to the previous year.

But Shell chief executive Ben van Beurden said the BG takeover will mark the start of “a new chapter” to “rejuvenate” the firm despite the downturn in Brent crude.

Fund houses including Kames and Rathbone have also come out in favour of the deal, shrugging off concerns that historic lows on global oil prices could deepen Shell’s $130bn debt.

A spokesman for Kames said: “We do not assess the value of the deal against today’s low spot oil price: this is a long-term deal. The bulk of the consideration is in Shell’s own equity, which has in effect already factored in a lower oil price.”

The fund believes that BG’s assets “will strengthen Shell’s portfolio” and accelerate the oil major’s long-term drive towards its liquefied natural gas business and deepwater activities, the spokesman added.

In addition, many of Shell’s shareholders will be urged by proxy advisory firms Glass Lewis and ISS to vote for the takeover after both publicly backed the plans earlier this year.

Shell needs to win support from the majority of its shareholders and at least 75pc of BG stakeholders to move ahead with the takeover.

Doubts over the deal emerged earlier this month after major shareholder Standard Life branded the tie-up “value destructive” and vowed to use its stake in Shell to oppose the plans. But days later the investment firm said it would use its 1.3pc stake in BG to vote in favour of the plans.

No other major shareholders have spoken out against the deal.

If the deal moves forward Shell will need to cut $7bn (£4.9bn) from its costs, $8bn of its investment and 10,300 jobs but will emerge as the world’s largest liquefied natural gas producer.

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