The acquisition of BG Group by Royal Dutch Shell

master's thesis

• Author: Martin Katičić
• Mentor: Davor Filipović (mentor)
• Granter: University of Zagreb; Faculty of Economics and Business; (Department of Organization and Management); Zagreb
• Defense date and country: 2020-09-22, Croatia
• Scientific / art field, discipline and subdiscipline: SOCIAL SCIENCES; Economics; Organization and Management

Abstract

The purpose of this paper is to study the concept of the acquisition of the BG Group by Royal Dutch Shell and how has created the largest liquefied natural gas company in the world. It was the first mega-merge in the industry for more than ten years in 2016 for $54.0 bn. The reason for Royal Dutch Shell for purchasing the BG Group was to acquire Brazil’s vast oil reserves, focusing on deep water fields and liquefied natural gas, but also to achieve consolidation of the oil market in an attempt to mitigate the downgrade of oil price. Royal Dutch Shell (Shell) acquired BG Group in February 2016 for a $19.0 bn cash payment and $35,0 bn worth of shares in exchange of all the shares of BG Group. The acquisition was part of Shell’s growth strategy to develop a more focused and simpler operational structure comprising upstream and downstream cash engines, deep water, and liquefied natural gas (LNG). BG Group’s acquisition enhanced Shell’s LNG and deep-water asset portfolio, particularly in Australia and Brazil. It enabled the company to accelerate and de-risk its LNG and deep water-focused strategy. BG Group was involved in the exploration, development, and production of hydrocarbons, LNG shipping and sale, and operation of LNG import facilities. Shell is an oil and gas company headquartered in the Netherlands. During 2016, Royal Dutch Shell acquired BG Group for US$70 billion. This acquisition catapulted Shell as the world’s second largest non-state oil company after Exxon Mobil in terms of market capitalization surpassing Chevron Corporation. The combination of Shell and BG Group brought together two world class portfolios involving productive oil and gas projects and expertise in deep water and liquefied natural gas (LNG). The acquisition gave Royal Dutch Shell a dominant footprint in offshore Brazil region. BG’s acquisition bolstered Shell’s position in the fast-growing liquefied natural gas market and turned it into the largest foreign oil company in Brazil. This acquisition was the biggest in the sector since Exxon’s merger with Mobil in 1988. The acquisition was expected to result in cost savings of an amount of $3.5 billion on account of reduction in overlaps in areas of corporate, administrative, and IT operations by 2018. BG Group shareholders received 383 pence in cash plus 0.4454 Royal Dutch Shell B shares for each BG Group share. The announcement day and one day after return was −3.4% and − 0.7% for Royal Dutch Shell during BG Group Acquisition.

• Keywords: MERGERS AND AQUISITIONS; MERGERS AND AQUISITION – TYPES; MOTIVATIONS FOR MERGERS AND AQUSITIONS; FACTORS IN CROSS-BORDER MERGERS AND ACQUISITIONS
• Language: english
• URN:NBN: urn:nbn:hr:148:693543
• Study programme: Title: Business economics - management; specializations in: Management; Course: Management; Study programme type: university; Study level: graduate; Academic / professional title: magistar/magistra ekonomije (magistar/magistra ekonomije)
• Type of resource: Text
• File origin: Born digital
• Access conditions: Open access
• Created on: 2020-09-27 06:38:25