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Shell-BG merger hits a snag

Royal Dutch Shell, the maker of Shell Tellus S2 M 32, has been dealt a blow in its plan to acquire BG Group.

On Friday, January 8, one of the global oil company’s major shareholders said that it would cast its vote against the proposed £34bn deal, citing the weak outlook for oil prices and risky BG assets in Brazil as its reasons for doing so.

The announcement from Standard Life Investment was made on the same day that Institutional Shareholder Services – an authoritative shareholder advisory firm – gave the deal a ringing endorsement, noting that the strategic benefits of the deal were not diminished by the downturn in oil markets that are currently being experienced.

Despite the dissenting view from one of Shell’s major investors, it is unlikely that the company’s Chief Executive, Ben van Beurden, will lose his drive to win support from shareholders when a vote is held on January 27.

Very few analysts or investors have openly voiced concerns or objections to the proposed merger and the strategic benefits of the deal for Royal Dutch Shell, which would see the company become the biggest trader of top liquefied natural gas and one of the most important offshore oil producers in the world.

However, with crude oil prices resting at a 12-year low of approximately $34 per barrel, it is only natural that some investors have voiced their reservations about the viability of the deal, which will see Shell take on more debt.

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