Shell plans buying BP
Shell is working with advisers to assess a possible acquisition of rival BP
Quick overview
- Shell is evaluating a potential acquisition of BP, awaiting favorable stock and oil price conditions before making a bid.
- Shell's market value has grown to approximately 149 billion pounds, nearly double that of BP, which has led to increased discussions about a takeover.
- Shell's CEO expressed a preference for share buybacks over a large acquisition, emphasizing the need for Shell to stabilize its own operations first.
- BP is planning to sell $20 billion in assets and reduce spending to enhance profitability amid pressure from stakeholders.
Shell is working with advisers to assess a possible acquisition of rival BP, and is waiting for additional stock and oil price drops before determining whether to make a bid. According to a Bloomberg report, the oil major has been talking more seriously with its advisors about the viability and benefits of a takeover in recent weeks.
BP and Shell were nearly equal in valuation for several years, but in the last few years, Shell has grown to nearly twice BP’s size, with a market value of roughly 149 billion pounds.
When questioned by the Financial Times on Friday regarding a potential takeover offer for BP, Wael Sawan, Shell’s chief, stated that he would prefer to repurchase more Shell stock.
Despite improvements over the past few years, he added, “We have to have our own house in order,” and that there is still “more work to do” when questioned about Shell’s ability to make large acquisitions during an earnings call. Shell would become even more powerful in the global energy sector if it were to acquire its rival in cross-town London.
This would give it the scale to compete with companies like Exxon and Chevron. Given the size of the deal, a merger would also probably draw regulatory attention.
Shell started a $3.05 billion share buyback this week after announcing impressive first-quarter results that exceeded profit projections. According to people who spoke to Bloomberg News, Shell may also wait for BP or another suitor to initiate contact. In this case, its ongoing efforts could help it prepare for the possibility.
Shell may concentrate on share buybacks and bolt-on acquisitions instead of a megamerger because talks are still in their early phases.
When questioned about the report, a Shell representative stated, “As we have stated numerous times previously, we are sharply focused on capturing the value in Shell through continuing to focus on performance, discipline, and simplification.”. BP chose not to respond.
BP CEO Murray Auchincloss has announced plans to sell $20 billion worth of assets through 2027, reduce spending, and repurchase shares in response to pressure to increase profitability and reduce costs.
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