BY RON BOUSSO
Royal Dutch Shell expects to slash thousands more jobs to save costs if
its takeover of BG Group goes through as planned early next year following a
final green light from China.
The acquisition, which was announced on April 8 and is
biggest in the sector in a decade, has been cleared by China's Ministry of
Commerce, Shell said on Monday, after earlier approvals from Australia, Brazil and the European Union.
Shell and BG will now send a merger prospectus to their shareholders and
hold special general meetings for votes on the deal. If approved, it will face
a court hearing 10 days later and could be completed by early February.
Some shareholders, however, have voiced concern over the merits of the
acquisition following the sharp slide in oil prices. The fall in Shell's share
price since April means the value of the deal has fallen to $53 billion from
$70 billion.
Shortly after announcing the green light from China, Shell issued a
statement saying it expected to cut about 2,800 roles globally from the
combined group.
That would be nearly 3 percent of the group's combined workforce of
about 100,000, or equivalent to more than half BG's roughly 5,000 employees.
The Anglo-Dutch oil and gas company had already outlined steps to
protect dividend payouts and cashflow following the merger, which include cost
savings of $3.5 billion and $30 billion in asset disposals.
The new job cuts are also in addition to
previously announced plans to reduce Shell's headcount and contractor positions
by 7,500 worldwide.
Shell B shares were down 1.6 percent by
1217 GMT, while BG shares traded 0.3 percent lower.
A BG spokesman said the company would
remain focused on its business plan until the deal is completed.
INVESTOR CONCERNS
The combination will transform Shell into
the world's top liquefied natural gas (LNG) trader and a major offshore oil
producer focused on Brazil's rapidly-developing sub-salt oil basin that would
rival Exxon Mobil's position as the world's biggest international oil company.
Shell has nevertheless had to battle a
sharp slide in oil prices, which have fallen from $55 a barrel in April to
below $40 a barrel, which some investors said undermined the deal.
"The deal doesn't make financial
sense at the current oil price. You have got to be pretty bullish on the
current oil price to make this deal work." David Cumming, Head of Equities
at Standard Life Investments, told BBC Radio on Monday.
Analysts at Credit Suisse, however, said
the deal still made strategic sense.
"Yes, it is tough when one looks at
spot oil prices ... We are in the camp of 'Yes', not just because of the
strategic rationale longer term, but also because of Shell's CEO and Chairman,
who we think are the right people at the helm in this environment," the
bank said.
Last month, sources told Reuters that the
Chinese Ministry of Commerce had pressed Shell to sweeten long-term LNG supply
contracts as the world's top energy consumer faces a large surfeit over the
next five years.
The integration of the two companies has
been planned by a joint committee in recent months but could encounter some
difficulties as BG's small and relatively nimble operations are merged with
Shell's much larger structure.
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