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BG holds back FTSE as Standard Life opposes Shell deal

Oil group among top fallers, weighing on flat FTSE 100, as Shell investor Standard Life Investments signals opposition to takeover.

 
BG holds back FTSE as Standard Life opposes Shell deal

Shares in BG have weighed on the FTSE 100 after Standard Life Investments said it would vote against oil major Shell's proposed takeover of its rival.

BG (BG) fell 1% to 930.7p, against a flat FTSE 100, down a single point at 5,910. Standard Life Investments head of equities David Cumming said the terms of the acquisition would be 'destructive' for Shell shareholders following the continued slide in the oil price since the deal was announced in April last year.

'This view is based on the downside risks to Shell's oil price assumptions plus the tax and operational risks surrounding BG's Brazilian asset base. Consequently we shall vote against the deal.'

Under the terms of the deal, Shell will pay 383p plus 0.45554 Shell B shares (RDSb) for each BG share. With the shares of both companies having dropped since the deal was first announced against the backdrop of a falling oil price, that equates to £10.09 per BG share at current prices.

That represents a premium of more than 8% on BG's current share price, pricing in the possibility of the deal not going through.

The proposed Shell takeover was seen as an opportune move to capitalise on the weak oil price, which has tumbled from over $115 a barrel in June 2014. At the time the Shell deal was announced, oil was trading at around $57, but has since fallen to an 11-year low of just over $33.

Cumming told the BBC the oil price needed to be over $60 for the deal to work. 'The problem we have with the deal is that a lot's changed since the bid was announced in April last year - all of it negative,' he said. Shell fell 3.5p to £13.72 on the news.

With the FTSE 100 relatively calm, the big risers were to be found on the FTSE 250. Laird (LRD) jumped 8.1% to 355.8p on rumours US group Amphenol (APH.N) could be sizing up a bid for the electronic components maker.

Home Retail (HOME) rose 7.3% to 148p after amid reports Sainsbury's (SBRY) could table a fresh bid for the Argos owner as early as this week, valuing the company at more than £1.2 billion.

China investment trusts were meanwhile hit by a fresh slide in the Chinese stock market, which slumped 5.3% in overnight trading. Fidelity China Special Situations (FCSS ) fell 2.1% to 127.3p while JPMorgan Chinese (JMC ) was down 5.7% at 148p.

4 comments so far. Why not have your say?

RippedOff

Jan 11, 2016 at 17:26

Standard Life don't say but they must have shares in both BG & Shell with a larger current valuation in the latter and hence they expect to make an overall loss?

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Hampshire cynic.

Jan 11, 2016 at 19:08

Yes, I too very much suspect a strong vested interest by SL. I hope someone from the Citywire population, who does not have a vested interest, could advise this modest investor of BG (400 shares), of what the best course of action might be. Any comments would be much appreciated.

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Anonymous 1 needed this 'off the record'

Jan 11, 2016 at 19:25

The fact of the matter is that oil share are now toxic, to the point of no return.

BP - safe as houses- err NO well done O'bummer

AFR - who knows what happen there

BG - sold at a small profit ages ago, was a nice steady share with a small div.

Now all O&G companies are being attacked by KSA, and debt will bring down perfectly good companies that borrowed to fund developments at the sensible price of $60 bucks a barrel, but that last years story.

FFS what will happen next, who knows, hence the problem. Cash is now king, so get what you can wile you can

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Graham Barlow

Jan 13, 2016 at 09:45

Do you remember back to 2008? Standard life investment Director went on TV and said that the Lloyds takeover of HBOS was the greatest investment since sliced Bread for Lloyds. Well he would say that wouldn't he when they ,Standard Life, had over *8% of HBOS at the time. So much for their judgement. Clearly it is vested interests as usual. They are clearly holding too mu ch Shell on a collapsing oil market. Time to throw spanners.

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