View the article online at http://citywire.co.uk/money/article/a872655
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.
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.
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.
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by Gavin Lumsden on Oct 26, 2016 at 14:01