Royal Dutch Shell agreed Wednesday to acquire UK-based BG Group for about $70 billion in cash and shares.
BG shareholders will receive 383 pence in cash and 0.4454 Shell B shares per BG share, a 52 percent premium over the company’s closing price on April 7.
Shell will also provide a mix and match facility that will allow BG shareholders to vary the portions of new shares to cash they receive.
Based on the price of Shell B shares at Tuesday’s closing bell the deal values each BG share at 1,367 pence with BG receiving $70.19 billion, or £47.0 billion, for its entire issued and to be issued share capital.
BG shareholders will hold a 19 percent stake in the combined group once the acquisition is complete.
The deal is expected to grow Shell’s proved oil and gas reserves by 25 percent and increase its production by 20 percent while saving the company $2.5 billion per year.
“BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell’s growth priorities and areas where the company is already one of the industry leaders,” Shell CEO Ben van Beurden said.
The deal must still be approved by shareholders in both companies.
“The offer from Shell delivers attractive returns to shareholders and has strong strategic logic. BG’s deep water positions and strengths in exploration, liquefaction and LNG shipping and marketing will combine well with Shell’s scale, development expertise and financial strength,” BG Group CEO Helge Lund said.
Shell also confirmed Wednesday that it expects to start a share buyback program in 2017 that will run from 2017 to 2020 and is slated to be worth at least $25 billion.
The Anglo-Dutch supermajor said the program will help offset the shares issued under the Shell scrip dividend program and will “significantly” reduce the equity issued in connection with the combination.