Shell shareholders approve BG takeover

Shell's shareholders have voted today in favour of the company taking over UK firm BG. BG holds its general shareholder meeting tomorrow, and its investors are also expected to approve the transaction. If the deal receives green light, the effective date of the takeover will be 15 February.

Shareholders voted 83.1pc in favour of the deal, with 16.9pc voting against. Around 61pc of eligible shareholders cast a vote.

The takeover was first announced in April last year, with the value of the deal at about $70bn. But as the transaction comprises only £13.2bn ($18.9bn) in cash and the rest in Shell B shares, the value of the deal has since fallen to about $50bn, as Shell's B shares have fallen roughly in line with oil prices.

Shell and BG published preliminary results last week to give shareholders the latest information on the companies' fourth-quarter and full-year metrics ahead of the votes. BG's strong operational performance — with 2015 production of 704,000 b/d of oil equivalent (boe/d) exceeding its guidance and jumping by 16pc from 2014 output — compared with Shell's continued fall in output and reserves could have convinced some undecided investors.

BG's high-margin assets with strong growth potential — Australian LNG and Brazilian deepwater projects — prompted Shell's takeover approach.

While the deal is likely to be beneficial for Shell in the longer-term, the company will have to deliver on its targets — including $30bn of disposals in 2016-18 — to balance its books in the shorter-term. Disposals play the key role in the company's announced plan to deleverage after its expected acquisition of BG, credit rating agency Fitch Ratings said this week.

Fitch has Shell's credit rating on negative watch, reflecting "the risk the BG deal presents to the rating in the current environment, although we believe it will be positive for Shell's business profile in the long run," Fitch said.