BG (BG.) dominated the finance pages following news of a cash and shares offer by Royal Dutch Shell (RDSB) that values the one-time utility at £46.7bn, or 1,350p a share. The offer, which has been backed by the BG board, represents a 52 per cent premium to BG's 90-day volume weighted average share price. And it's 29 per cent in advance of the current consensus target valuation.
The integration of BG's assets would enable Shell to shore up a dwindling reserve base, while providing significant cost synergies across the combined entity. However, the primary strategic aim of the move is to place Shell at the apex of the global market for liquefied natural gas (LNG). Although there's every chance we'll see another pull-back in LNG prices later this year as new production hits the market, this area of the global energy market certainly offers the strongest long-term fundamentals. BG's giant Queensland Curtis LNG complex will make a welcome addition to Shell's portfolio, particularly given its proximity to the energy-hungry economies of Asia.