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BP-Shell merger back on the cards

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  1. Elia 30 oktober 2006 10:33
    BP-Shell merger back on the cards

    Terry Macalister
    ------------------------
    Shell was at the centre of buyout moves and speculation on Monday after it unveiled plans to spend C$7,7-billion (£3,7-billion) simplifying its North American business. This was seen by some as a step towards a £230-billion mega-merger with BP.

    The Anglo-Dutch oil group has also had its name linked with Premier Oil, although most industry experts rule out Shell being the unnamed company now in take­over talks with the exploration firm.

    Shell said on Monday it would buy the 22% it did not own in Shell Canada, which is independently managed. It is quoted on the Toronto stock exchange and is involved with oil-sands production in Alberta. “We think the interests of the Shell Canada minority shareholders are well served by accepting the cash offer we are proposing,’’ said Jeroen van der Veer, Shell’s chief executive.

    A Shell spokesperson said the deal would speed up decision-making and integrate the business into the whole Shell group. “It naturally follows from the successful unification of the wider Royal Dutch Shell company in 2005 to a group with one chief executive and one headquarters,’’ she added.

    Shell must still secure the support of its subsidiary’s board and more than half of the outstanding shares being tendered, but few industry experts anticipate opposition. Equity analysts said the move was “good housekeeping’’ and might be one that could more easily be achieved by Shell ahead of any possible tie-up with BP.

    Earlier this year Britain’s biggest company acknowledged that it had been looking at the idea of a merger as part of “scenario planning’’.

    The spokesperson declined on Monday to discuss the possibility of mergers with either BP or Premier Oil, insisting the company’s policy was to “never comment on market speculation’’.

    Recently Wall Street analysts have put out research notes on the benefits to both sides of a tie-up, although they accept there would be big regulatory hurdles to overcome.

    “A Shell-BP merger would make a lot of sense and would allow [Lord] John Browne [the BP chief executive] to leave his company on a high note,’’ Fadel Gheit, an analyst with Oppenheimer & Co in New York, said on Monday. Gheit put out a note last week saying that Shell and BP could make annual savings of more than $5-billion and significantly improve the new company’s operating efficiency. This would help it compete with ExxonMobil.

    BP’s share price has risen by less than 6% and Shell’s less than 8% this year while ExxonMobil’s has soared by 24% and Gheit, unlike many of his fellow analysts, thinks regulatory clearance could be achieved without too many divestitures being demanded.

    Gheit also believes that a merger creating the largest stock market-quoted oil group in the world would be a crowning achievement for Lord Browne, who is due to retire in 2008.

    BP has been hit by regulatory investigations into safety, environmental and trading problems in the United States that look set to dog Lord Browne until he stands down.

    Meanwhile, Premier Oil, which has long been the target of takeover speculation, said on Monday it had received a preliminary takeover offer, although it admitted talks were at an “extremely early stage”.

    Shares rose 7% but Premier admitted “the proposal is subject to a number of conditions, including due diligence and financing”. The reference to financing ruled out, in many minds, any suggestion that a company as big as Shell was involved. Premier did not identify the potential bidder and experts said there was speculation that it might be Pemex of Mexico, or a company from the Middle or Far East.

    Premier is reported to have already received a bid worth about £1,2-billion and its name has most recently been linked with Shell.

    Last month Premier’s chief executive, Simon Lockett, denied receiving a takeover approach from the Anglo-Dutch group. Premier has assets in the North Sea but also owns some much further afield, in countries such as Indonesia, Pakistan and Guinea Bissau. -- © Guardian News & Media Ltd 2006
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