Sector News

Shell wins final Australian approval for BG Group takeover

December 3, 2015

Shell’s £55bn takeover of BG has been cleared by Australia’s Foreign Investment Review Board, handing the deal its penultimate approval from global regulators.

The green light from FIRB for the deal comes after Australia’s competition authorities also approved the deal last month, and follows success with regulators in the US, EU and Brazil.

There has been mounting scrutiny of the rationale for pressing ahead with the takeover while oil prices remain so supressed.
“I am very pleased to receive this news,” Ben van Beurden, chief executive of Shell said. “The FIRB approval is an important step towards deal completion.”

He added: “The addition of BG’s integrated gas assets in Australia to Shell’s global portfolio is one of the main strategic drivers behind the recommended combination. The Shell-BG combination is a sign of Shell’s confidence in the Australian economy. It is also a springboard to change Shell into a simpler, more profitable and resilient company. We remain on track to complete the deal in early 2016.”

The Sunday Telegraph reported that Shell was destined to receive the last remaining regulatory clearances from Australia’s FIRB and China’s Ministry of Commerce before Christmas.

FIRB, which applies a national interest test to takeovers, has green lit the takeover with an unusual condition that is designed to prevent disputes with the country’s tax office.

The condition requires Shell to undertake a “co-operative compliance approach” to taxation for BG’s coal seam gas business, QGC, in Queensland, which will be more closely aligned with Shell’s existing Arrow business in the country.

Shell has said that the condition requires Shell to agree with Australia’s Taxation Office how it will approach transfer pricing and loans between different arms of the company before filing tax returns from the merged group.

“Shell will commit to undertake a co-operative compliance approach to taxation arrangements for QGC, in line with our preferred approach elsewhere.”

The approval from FIRB leaves China’s Mofcom the last remaining regulatory obstacle, however sources have said that Shell has already made remedy proposals to the ministry that are currently being scrutinised.

China was originally said to be viewing the deal as an opportunity to renegotiate its long-term gas supply – billion-dollar contracts between Shell and the country’s energy champions, China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC) and Sinopec – which could have strained the rationale for the takeover.

However, CNOOC and CNPC have already pledged their broad support in return for continued co-operation with Shell on projects around the world.

The takeover still requires 50.1pc of Shell investors and 75pc of BG’s shareholders to vote in favour.

By Ashley Armstrong

Source: The Telegraph

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