Under the terms of the agreement, Shell will acquire BG’s liquefied natural gas (LNG) business as well as BG’s projects in Brazil, East Africa, Australia, Kazakhstan and Egypt, as cited in Reuters.
The deal will offer BG shareholders with about 19% of the new combined business, which is expected to generate pre-tax synergies of approximately $2.5bn annually.
Shell will pay 1,350 pence per BG share and a 52% premium to the 90-day trading day volume weighted average price of 890.4 pence per BG Share on 7 April 2015, the firms said.
BG shareholders will be entitled to receive 383 pence in cash and 0.4454 Shell B shares for each BG share.
Upon completion of acquisition in 2016, Shell will boost its oil and gas reserves by 25% and production by 20%. It will also consolidate its positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.
A share buyback program worth at least $25bn will be started by Shell in 2017 for the period 2017 to 2020 in order to offset the shares issued under the Shell script dividend program and to significantly reduce the equity issued in connection with the combined business.
Shell CEO Ben van Beurden said: "BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell’s growth priorities and areas where the company is already one of the industry leaders.
"Furthermore, the addition of BG’s competitive natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel."
"We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios.
"Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace."
Image: Shell agrees to acquire BG Group for $70bn. Photo: courtesy of adamr/Freedigitalphoto.net.
