Shell set on acquiring gas utility BG Group

BG Group confirmed on Tuesday that the company is in advanced talks with Royal Dutch Shell about a potential sale worth $50 billion.

The Wall Street Journal reported, citing “people familiar with the matter”, that oil giant Shell is in advanced discussions to acquire gas utility BG Group.

The merger would create a company with market capitalization of over $296 billion (£200 billion).

BG Group

BG Group said:

“There can be no certainty that any offer will ultimately be made for BG.”

The company also said that Shell has until May 5 to make a firm offer.

BG Group is the UK’s third largest energy company and has a market value of $46 billion. It used to be a part of British Gas.

Its shares increased by 6.7 percent on Tuesday.

The reason why the business is appealing to Shell is because it one of the biggest players in liquified natural gas.

The deal would be the largest energy company acquisition since Exxon Mobil’s $31 billion deal for XTO Energy over five years.

Hague-based Shell had $21.6 billion in cash and near-cash items at the end of 2014.

BG has increased reserves in six of the past seven years while Shell reserves have dropped in two of the past three years.

Shell operates in over 70 countries and has a workforce of 94,000. Its stock has dropped by 5.5 percent over the past year.

Brent crude prices has dropped by 45 percent.