Oil major Shell’s bid for BG Group has been approve by the ISS (Institutional Shareholder Services).
The positive move comes after the company had sought to alleviate shareholder concerns over whether its takeover was still viable at sub $50 oil.
ISS, a proxy advisory body, has backed the deal which it said had a “compelling strategic rationale” in the current climate.
A report from the company said: “Investors may understandably be discomforted by the significant volatility in global spot prices for oil.
“It is worth recognising, however, that the spot price today may be of very little value in assessing the strategic opportunity of a transaction whose benefits will be realised over decades.
“In particular because of the compelling strategic rationale, and the significant positive economic to be realised within a relatively short timeframe, support for the transaction is warranted.”
The company is confident investors will back the deal later this month, despite the oil price hitting a 12-year low yesterday at $32 a barrel.
The merger was announced by Shell in April last year when oil was trading at around $55 a barrel.
Shell had previously estimated the combined group would be profitable with oil prices around the $70 a barrel mark.
Then, last month the company said it work in the low $60s.
Finance chief Simon Henry told analysts earlier this week that stress tests had been conducted which showed the companies could withstand oil at $50 a barrel over the next two years.
Shell plans to reduce its capital spending by $35billion this year as it delays share buybacks and extends scrip dividends.
Chief executive Ben Van Beurden is expected to meet other leading investors in London today where he and his finance chief will hold phone briefings with US investors next week, according to company sources.
The investors are being asked how they plan to vote on the deal. Several so far have confirmed their support, but most have refused to disclose their plans, according to the sources.
Recommended for you
