BG and Shell: large-scale integration on the oil market approved by European Commission
The business world had no opportunity to observe such a huge fusion affair since 1999, when merging of Exxon Mile – American multinational oil and gas corporation took place.
EU approval
The EU Commission has a duty to assess the merging agreements of companies, which can impede effective competition on the markets. On September, 2 The European Commission gave their verdict about this historic deal between Royal Dutch Shell and BG Group. After deliberate consideration of all the latest oil-market tendencies they approved Shell's acquisition of BG. The main argument for the companies' integration went as following: "…takeover would not lead to Shell's benefiting from market power in a number of markets, namely oil and gas exploration, the liquefaction of gas and the wholesale supply of liquefied natural gas (LNG)"
Why to merge?
It was in April, when two rival-companies declared about their bilateral agreement to unite their forces.
BG Group is a British multinational oil and gas company headquartered in Reading, United Kingdom, which is active more than in 20 countries having 5000 employees. As mentioned on their Internet site "A world leader in exploration and LNGA" seems to be helping Royal Dutch Shell in their difficult times. As was mentioned in some Internet resources, Shell, Anglo–Dutch multinational oil and gas company claimed to be one of the most valuable in the world, hasn't been so successful recently. Now with oil-prices falling and heightened competition, it gets difficult for them to hold the field and cutting of 6500 employees and revealing a 35% drop in profits can be considered as a consequence of their instability. Still, the deal was valued at around $70 billion that makes it one of the largest acquisitions ever. In July quarterly statement, Shell remarked that the plans of the two companies were mutually agreed as a "world class integration" of two industry leaders. The combined corporate market of two giants would be only partial.
New leader
After announcing of the integration, Helge Lund, the BG Chief executive Officer promised to make it a suitable component part for cooperation with Shell. Lund, a 52-year old BG chairman, graduated in business management at the Norwegian School of Economics in Bergen. He also has a Master of Business Administration (MBA) from the INSEAD business school in France. To join the management of BG Group as CEO he left his position at Norwegian energy company Statoil, saying that it was a perfect timing for a change. Lund will run BG until the acquisition is completed, then probably leave the company. "The transaction will take time to complete, during which my team and I will remain committed to BG and our shareholders, and to safely delivering our 2015 business plan," Lund said in a statement. For his job there, he is supposed to earn around $43 million for a year.
Business directions
So far BG Group conducts their business divergently. They focused on pushing production from its Queensland Curtis liquefied natural gas facility in Australia, which has been working since the early 1990s. In January, BG announced it created an alliance with contracting company KBR in an effort to cut costs in the low price environment.
The European commission hasn't found any reason to forbid this merging so nothing hinders the realization of their strategies. How the integration will influence the profitability of the two companies we'll see in time.
