Shell wins shareholder approval to purchase BG Group

Ben van Beurden, CEO of Shell, speaks at the shareholders meeting in Netherlands, on Jan 27, 2016.
Ben van Beurden, CEO of Shell, speaks at the shareholders meeting in Netherlands, on Jan 27, 2016. PHOTO: EPA

THE HAGUE, Netherlands (REUTERS, BLOOMBERG) - Shareholders of Royal Dutch Shell approved the company's US$49 billion (S$75.9 billion) takeover of BG Group on Wednesday, clearing one of the final hurdles for a deal that will create the world's biggest liquefied natural gas (LNG) trader.

As many as 83 per cent of shareholders voted in favour and 17 per cent against the deal, one of the largest in the energy sector in the past decade.

The deal seals its biggest acquisition amid the worst oil-industry slump since the global financial crisis.

The approval vindicates Shell's belief that it can better ride out the market rout by combining with U.K. oil and gas producer BG. Crude's tumble since the deal was announced in April prompted some shareholders to question whether it's paying too much, yet Chief Executive Officer Ben Van Beurden has said the acquisition will boost cash flow and enhance Shell's ability to pay dividends, while BG's growing production will help bolster its declining output.

The planned acquisition, which will also make Shell the world's biggest liquefied natural gas trader, now faces a vote by BG investors on Thursday and final court approval before the deal can close in mid-February.

Benchmark Brent crude has lost almost half its value since the purchase was announced and now trades near US$30 a barrel. That slump, which Shell has said may be prolonged, means the company may need longer to make a profit on the acquisition. It said last month it will break even when Brent reaches the low US$60s, and add to operating cash flow per share at US$50 this year. Brent for delivery in December 2020 is currently at about US$50 a barrel.

Shell bid 0.4454 of its B shares and 383 pence for each BG share in April, valuing the transaction at US$70 billion and offering a 50 per cent premium. As Shell's stock has dropped with the oil price, the deal's value has declined to about US$51 billion.