Royal Dutch Shell set to acquire BG group

It has been a while we saw any big merger from the oil company majors. With the plunge in oil prices we anticipated mergers and acquisitions in the oil industry due to devaluation of stock prices. Late last year we saw Haliburton buy over Baker Hughes the largest oil service companies after market leader Schlumberger. 

This has led to the present acquisition of BG group by Royal Dutch Shell Plc in a deal that will see Royal Dutch Shell pay $70 billion. BG’s shares had fallen over 50% since January last year, if Shell wants the easy way out it makes a lot of sense to buy BG now because it will cheaper to develop already existing assets. 

The two companies are set to save at least $2.5 billion dollars a year with this deal, so it is not necessarily about the size of the new mega company but a more efficient machine that eliminates the long supply chain process. 

Both companies are major players in the gas sector, so they are both looking deep water developments with BG having major stakes in East Africa and Australia. This move will see the combined company as the biggest LNG producer in the world. The fast growing LNG business needs to make energy consuming countries like China and India see the need to switch to cleaner energy sources that are equally cheap, also giving Europe an alternative to Russia's gas.


Courtsey

http://fortune.com/2015/04/08/5-things-to-know-about-the-biggest-oil-merger-in-a-decade/