Shell-BG tie-up could challenge market leader Exxon Mobil

Royal Dutch Shell to buy BG Group for $70 billion, expanding oil giant's claim on world's natural-gas market

European petroleum giant Royal Dutch Shell has agreed to buy British rival BG Group for roughly $70 billion in a deal that could help the two companies battle low oil prices while pressuring market leader Exxon Mobil Corp.

Shell, which is based in the Netherlands and incorporated in London, said it would pay 47 billion British pounds for BG if allowed by regulators and the companies’ shareholders. The price amounts to $20.41 in cash and stock for each BG share – a 50% premium over BG’s closing price Tuesday.

By absorbing BG, Shell would become the largest producer globally of liquefied natural gas, Shell said Wednesday. The company said it also would have better access to production projects in Australia and Brazil and be able to increase its oil and gas reserves by 25%.

And with BG’s resources, Shell would be better equipped to deal with crude oil prices that have plunged to historical lows due to a glut of supply.

The price of benchmark Brent crude oil slid from well over $100 a barrel last summer to less than $50 at the beginning of the year before starting to slowly recover.

BG's stock price soared 27% on Wednesday to 11.53 pounds, or $17.20 a share, in London trading. But Shell's stock was down $2.85, or 4.6%, to $59.10 in midday U.S. trading.

If the purchase is approved, BG shareholders will own 19% of Shell.

Copyright © 2016, Los Angeles Times

UPDATE

9:05 a.m.: This article has been updated throughout with a staff-written version.

The original version of this article story was published at 1:35 a.m.

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