Wednesday, 8 April 2015

BG Group shelling out?

BG Group @ 1250.5p, +340.1p (+37.36%)
RDS "B" @ 2091.5p, - 117.00p (-5.30%)

Hmm, mixed feelings on this one which has been a long, long time coming, and hats off to RDS as it looks to be at a better price (advantage RDS), than might have been some years ago when the move was first touted.
BG Groups assets seem to be pretty much the same and the original submission put forward the view that this would help boost RDS poor performance in replacing assets (shortly after their accounting scandal I think).
It was also thought at the time that this might create an auction for BG, so we will have to see.

Disappointing for me to see the price vs. what the previous buy out might have been at (if it had happened), the price that the shares have been, and the failure of management to capitalise and realise the potential of the assets it had "explored" and found".

As it is, reading the news this morning, and seeing the jump in the price, did give me a sense of relief at this long running disappointment, until that is, I realised the measly reward that that actually gives me.

Its an investment I have held for a long time now in the hope that either it would capitalise on its investment or be acquired for a more deserving premium.
Its also fair to say that it is an investment that pre-dates much of my portfolio and never quite sat right but whilst the story held, and management appeared to be moving in the right direction, it seemed justified.
However, the slippage in management credibility, and the collapse in the oil price (albeit one that seems can only be temporary), the price of BG has collapsed making it the disappointment that it currently is.

The roll-over of management only adds to that disappointment and, even with the new CEO (leaving after the deal completes!), questions capability that it should potentially reach this point.

Strange that the price has not risen to the offer price though. 1250p v. 1350p, following a move down in the share price of RDS affecting the share part of the offer?
The offer being £3.83 + 0.4454 RDS B shares (UK)

So 1250 - 383 = 867p the BG valuation of a 0.4455 share in RDS?
2091.5p x 0.4454 = 931.55p?

So the difference between 931.55p and 867p, 64.55p, could actually be a premium for BG shareholders, as they could be paying 867p, for 931.55p worth of RDS?

Or is that doubt or is there an opportunity to pick up £1 per share with an additional purchase, the difference between today's 1250p and the 1350p?
Or is the deal now just worth 1317p (1250p + 67p), because of the fall in RDS, and will it go up again?

Time will tell of course but I might just need to take a look at RDS and possibly pick up a few more BG?
Either way, RDS offers a more attractive yield whilst still offering a potential recovery in the oil price.
My holding in BG Group is smaller and being halved, a holding in RDS would be even smaller, so I need to consider the opportunity to gain an increased position in RDS, but knowing there is still risk that the deal might fall through?

Related Article: BG Group shares rocket on recommended £47bn takeover offer from Shell Shell confirms agreed £47bn bid for UK gas producer BG Group Analyst presentation
- Shell agrees deal to buy energy rival BG Group for £47bn ROYAL DUTCH SHELL PLC - Recommended Cash & Share Offer for BG Group by Shell PLC

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