Outgoing chief parachutes to safety with £30m pay-off in £47bn Shell-BG Group merger


Shell Chief Executive Ben van Beurden
Shell Chief Executive Ben van Beurden

Shell’s £47 billion mega-merger with BG Group could trigger a £30 million pay packet for the chief executive of its smaller rival.

In their joint statement, the two firms said that as part of the recommended deal, Shell would pay 383p in cash plus 0.4454 Shell B shares for each BG share – a premium of around 52% to the 90 trading day average.

As a result, BG Group CEO Helge Lund could see his pay for his first year top £32 million in pay, bonuses and share options, according to Reuters.

The deal could be one of the biggest of 2015 and could produce a company with a value of more than £200 billion. Shell’s £177 billion market capitalisation dwarfs that of BG, which now stands at £31 billion after a 20% fall in its share price over the past year.

The deal is expected to generate pre-tax synergies of around £2.5 billion per year and Shell said the mega-merger would boost its proven oil and gas reserves by 25%, and give it better prospects in new projects, particularly in Australia LNG and Brazil deep water.

Shell Chief Executive Ben van Beurden said the group ‘will remain committed to North Sea operations’ but is also committed to reducing overall capital expenditure in the new $50-barrel oil world.

Shell employs 2,400 people supporting its North Sea oil operations and has already announced some job losses. BG Group employs 1,500 in Aberdeen and at its head office in Reading, Berks.

A fund manager at Lombard Odier Global Energy commented: “With BG Group, Shell gets exposure to Brazil’s vast Santos Basin reserves, and further involvement in the integrated gas market.

“But it comes at a hefty price. Management will have their work cut out to execute the deal and generate synergies and assets sales.”

The proposed deal, seen as a possible harbinger of further mergers and acquisitions activity in the battered energy sector, fuelled by ultra-low interest rates across the developed world, lifted the general mood.

Marc Kimsey, senior trader at Accendo Markets, said: “The deal between Royal Dutch Shell and BG Group will prompt sector consolidation.The decline in oil price over the past year has battered some stocks which are clearly now looking attractive.

“In the last year BG shares fell 30%, shares in Tullow Oil have fallen 65%, Premier Oil down 55% and Petrofac down 20%.

“By comparison, sector behemoths BP and Royal Dutch Shell have only shed 10% over the same period, leaving them in the position of predator rather than prey.”

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