Royal Dutch Shell plc RDS.A will likely get approvals from the regulators of China and Australia before Christmas to proceed with the acquisition of BG Group plc − a leading upstream energy player in the UK – going by The Telegraph. The prospects of the BG buyout will rest on shareholders once the Chinese and Australian regulators give the green signal.
As per the source, Ben van Beurden – the CEO of Shell – has already met the ministry of commerce of China. Previously, it was thought that China would consider the deal as a chance to renegotiate the country’s big energy players’ long-term contracts with Shell. However, China National Petroleum and CNOOC Ltd. CEO voted in favor of Shell.
During the first half of this year, the integrated energy major had announced that it has entered into a deal with BG Group plc. Per the agreement, Shell is expected to acquire BG Group for a total consideration of $70 billion – including both cash and equity payments. This is the biggest merger within energy firms in a decade.
If everything falls in place, the transaction will likely be completed by early 2016. Many analysts are anticipating that the total value of the combined company will be more than $296 billion. Hence, with the transaction, Shell – currently with market capitalization of $157.95 billion – will get closer to the world’s largest publicly traded oil company, Exxon Mobil Corporation (XOM), which is currently valued at $339.95 billion.
Moreover, some analysts believe that, in terms of market value, the new company will be twice the size of London-based BP plc BP and even surpass Chevron Corp CVX.
In a separate development, Shell declared its intention to invest in boosting alpha olefins production at its Geismar, LA-based chemical manufacturing spot.
It is to be noted that at Geismar Shell already has three alpha olefins units. The new plant is expected to generate 468,000 tons every year of alpha olefins. On top of that, with the new unit the total capacities will likely be boosted to a great extent. Shell will start the construction of the new linear alpha olefins manufacturing unit from first-quarter 2016 in which the company will invest $717 million.
Shell currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
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