Royal Dutch Shell agreed to take over British Gas (BG) for $70bn.
Shell and BG announced in a joint statement that the former will pay cash and shares with an estimated value of BG shares at about 1,350p, which represents a price premium of about 52% on the average share trading price, in 90 days.
Nerine Elwy, Communications Manager at Shell Egypt, said that the company has not yet signed the final agreement with BG, and the proposed alliance between the two companies is currently under negotiation.
According to the joint statement from the two companies, the deal between Shell and BG could achieve annual savings of approximately £2.5bn before taxes. The deal will result in BG shareholders owning approximately 19% of the new group resulting from the merger.
According to a report released by both companies in 2015, Shell will pay dividends with the amount of $1.88 for the normal share. In 2016, Shell will not pay less than this amount.
It is expected that Shell will initiate a programme to re-buy shares in 2017. The cost of the programme will be no less than $25bn, between 2017 and 2020.
The deal will raise the oil and gas reserves up to 25%, and the company aims to increase assets to $30bn during 2016-2018, according to Shell.
Director of External Affairs for Shell said that the new management has not yet determined the areas of excellence that belong to both companies worldwide, in case the alliance between Shell and BG Group is completed.
According to the report, the market value for BG is at $46bn, while Shell’s value is worth $202bn. The market value for Exxon Mobil, on the other hand, the largest international oil company, is $360bn.