Out-Law News 2 min. read
10 Apr 2015, 5:06 pm
Energy law expert Paul McGoldrick of Pinsent Masons, the law firm behind Out-Law.com, said that the two companies would probably have already given "significant thought" to their legal duties to notify any potential tie-up to various regulators, in particular the European Commission. The companies could potentially deal with any competition law concerns by disposing of certain assets before the merger and providing "undertakings" to regulators, he said.
"We have seen a number of recent examples of parties proactively taking a programme of proposed divestments and other undertakings to the EU to smooth the path to a quicker 'phase 1' clearance," he said.
"The EU Commission would clearly be a key regulator in the process. It operates with a broader lens than some others. It will take into account how the combined entity would impact the EU market, even if the exploration or production activities take place elsewhere," he said.
The Commission was likely to consider the proposed new company's combined market share and range of competitors in various markets, including oil and gas exploration and production and the production of liquefied natural gas (LNG), he said. It could also take into account factors such as the links between other industry players and how infrastructure assets, such as pipelines, owned by one of the companies would be controlled after any merger; as well as whether there was "a pro-competitive rationale for the deal being done", he said.
"If it goes ahead, the deal would be likely to come across the desks of other regulators," he said. "Countries where the deal would be likely to receive particular scrutiny include those in Brazil and Australia. First impressions are that overlaps between the parties outside these jurisdictions are relatively limited."
Shell and BG Group announced on 7 April that they had reached agreement on a "cash and shares offer" which would give existing BG Group investors a 50% premium on the value of their shares on that date. The board of BG Group has recommended that its shareholders vote in favour of the deal, which could be completed during the first quarter of 2016 if regulators approve. Once the deal is completed, BG shareholders would own around 19% of the new company.
BG Group is currently the UK's third largest energy company, and was created in 1997 from the exploration and production business of the former British Gas. Shell said in a statement that the deal would enable the company to "accelerate its growth strategy" in global LNG and deep water exploration, and would add around 25% to its oil and gas reserves and 20% to its annual production.
"This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders," said Shell's chairman, Jorma Ollila, when the announcement was made. "The result will be a more competitive, stronger company for both sets of shareholders in today's volatile oil price world."
