Royal Dutch Shell has told investors that the massive £55bn takeover of BG Group will produce “billions” in savings.
Projected savings from cost reductions verifiable under takeover rules, such as merging headquarters, come to about £1bn, but the company has said that savings are actually likely to be a “multiple” of this, because of “value synergies” that are difficult to quantify, the Financial Times reports.
The merger, which makes history as the 14th biggest takeover ever, is likely to be just the beginning of takeovers in the industry, as oil producers have been hit hard by falling oil prices.
Investors have been concerned that oil prices are too low for the deal to work, but Shell’s finance chief Simon Henry has hit back at this, telling concerned investors that the deal will work at $70 a barrel, according to the FT.
Shell’s share price has gone down by 13 per cent since the BG deal was announced in April.