Shell denies takeover talks with UK rival BP

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Shell has denied it is in talks to acquire rival BP after months of speculation about a deal that would combine the UK’s two biggest oil companies.

“This is further market speculation. No talks are taking place,” said a Shell spokesperson, who added that the company has repeatedly said it is focused on its own performance, rather than growing through a major acquisition.

The statement followed a report by the Wall Street Journal that the two companies were in early stage talks about a takeover deal that would create a global energy group worth more than £200bn.

BP’s New York-listed shares initially climbed more than 10 per cent before falling back to trade 1.7 per cent higher. Shell was trading about 0.8 per cent lower having earlier dropped as much as 4 per cent.

Shell has been persistently linked to a bid for BP after a 32 per cent drop in the latter’s share price over the past year.

Elliott Management, the activist hedge fund which has built a 5 per cent stake in BP, has warned that the company faces a takeover unless its management makes deeper cuts to its costs and spending.

However, Shell chief executive Wael Sawan has expressed little public interest in pursuing a takeover of its rival, telling the FT in May that he preferred to buy back Shell’s own shares than to use the money on a deal for BP.

Shell has spent at least $36bn on buying back its shares over the past three years, during which time its share price has outperformed BP by over 30 per cent, as Sawan improved the company’s financial health, cut costs and simplified its sprawling business.

A deal for BP could theoretically be transformational for Shell, creating an energy giant pumping out close to 5mn barrels per day of oil and gas — more than ExxonMobil or Chevron. It would also have as much as a quarter of the world’s LNG market and a significant presence in the US. 

However, the integration of the two businesses, with very different cultures, would take several years, according to insiders at both companies. There could also be tens of thousands of job losses, a potential political problem for the UK government.

Analysts have said it was not clear that a combination would make financial sense but have also questioned whether Shell could risk sitting on the sidelines if another rival sought to make a bid for BP.

Earlier this month, Matthew Lofting, an analyst at JPMorgan concluded in a research note that BP’s oil and gas assets would be a better match for Chevron.

BP is seen as vulnerable to a takeover attempt following a series of strategic mis-steps and changes at the top of the company. BP chair Helge Lund has announced he is stepping down from the board and the search for a replacement is under way.

BP did not immediately respond to a request for comment.