UK-based Shell has put to rest speculation that it has approached fellow UK oil major BP about acquiring the company.
There has been speculation for some time that Shell may acquire BP, whose value has dropped by almost a third in the last year. This intensified following a report in the Wall Street Journal that the companies were in early talks.
In a press release, Shell quickly denied that any talks had taken place, nor had it approached BP or even had any intention to do so.
An AJ Bell investment analyst, Dan Coatsworth, pointed out that acquiring BP could be seen as making investors’ interests in Shell riskier. He added:
“There might be several years of management distraction on integrating the business and finding buyers for any inherited assets that are deemed non-core. Investors might simply take the view that Shell is already well-served by its current assets and a BP takeover would give it indigestion.”
There is also considerable overlap in operations. For example, Shell develops and markets lubricant products like gear oil under its own branding, while BP markets equivalent products under the Castrol brand.
To firm up its denial, Shell issued the press release under Rule 2.8 of The UK City Code on Takeovers and Mergers. This restricts Shell from making a formal offer for BP for at least six months. Nevertheless, it could still make an offer in certain circumstances, such as if a third party announced plans to acquire it or if Shell secured the consent of BP’s board.
