Shell’s Takeover of BG Group Clears Australian Hurdle 

Tie-Up’s success hangs on approval from China and Australia’s Foreign Investment Review Board

Australia’s antitrust regulator won’t stand in the way of Royal Dutch Shell PLC’s takeover of BG Group PLC, brushing aside its earlier concerns that the tie-up could reduce the supply of natural gas along the country’s heavily populated East Coast.

The decision removes one of the final—and more contested—regulatory hurdles for the tie-up between the two oil and gas companies, paving the way for the deal to completed—as expected—in early 2016.

Shares in the companies rose in London trading as investors reacted positively to the news, with Shell up 1.3% and BG gaining 1.2% on Thursday afternoon.

The deal—a crucial part of Shell’s strategy to refocus on its natural-gas and deep-water oil businesses—hasn’t always been viewed positively by investors.

Several investors have expressed concerns that Shell paid too much for BG—a smaller British company with a strong position in LNG and Brazil’s offshore oil fields—and that the deal relied too heavily on a recovery in oil prices to be successful. The deal was valued at roughly $70 billion when it was announced in April.

Shell executives have been vigorous in their efforts to dispel concerns since the deal was struck in April. As the deal is a cash-and-stock offer, they argue that the price fluctuates with the value of the two companies’ shares and that it will add value to the company even if oil prices stay weak.

Regulatory uncertainties have also plagued investor perceptions about the deal.

The Australian Competition and Consumer Commission’s announcement Thursday that it doesn’t believe the planned acquisition would substantially lessen competition in the wholesale gas market follows a lengthy review.

In September, the commission deferred a decision on the deal to gather more information after receiving a number of submissions from businesses worried that Shell would curb local supply in favor of more lucrative exports to Asia through BG’s liquefied-natural-gas terminal on the East Coast.

The European Commission approved the tie-up after a brief investigation, while competition authorities in Brazil and the U.S. also cleared the alliance. Australia’s Foreign Investment Review Board and Chinese authorities still need to rule on the deal.

Shell has said it expects to receive all necessary approvals in time for the deal to be done in early 2016 and that the process in China is progressing smoothly. It said it expects to hear from Australia’s FIRB within a number of weeks. Shareholders still need to vote on the deal.

Source: WSJ – Shell’s Takeover of BG Group Clears Australian Hurdle

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