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Shell Gets Go-Ahead from Brazil to Acquire BG Group - Analyst Blog

Zacks Equity Research

Royal Dutch Shell plc RDS.A finally got the approval from the Brazilian regulatory authorities to proceed with the acquisition of BG Group plc, a leading upstream energy player in the U.K.   

The competition authority of Brazil – CADE – was reviewing the covenant since early this year when Shell’s $70 billion deal was announced. The regulators revealed that Shell will not hamper the competitiveness of the country’s energy market after the completion of the acquisition. To interpret this in another way, the clearance reflects that Shell − operating offshore Brazil − will not hold a monopoly in the oil and gas market of the country even though the merger is touted to be the biggest in a decade.

Investors should know that CADE’s authorization will be final only if there are no appeals within the 15-day window period. This is as per the statement given by Shell to Bloomberg. It is also to be noted that the integrated energy major got the green signal from the U.S. regulators last month for the BG purchase. However, Shell still needs other authorizations from various countries including China’s Ministry of Commerce for the accord.

If everything falls in place, the transaction will likely be completed by early 2016. Many analysts are anticipating that the total value of the combined company will be more than $296 billion. Hence, with the transaction, Shell – currently with market capitalization of $173.72 billion – will get closer to the world’s largest publicly traded oil company, Exxon Mobil Corporation XOM, which is currently valued at $342.73 billion.

Moreover, some analysts believe that, in terms of market value, the new company will be twice the size of London-based BP plc BP and will even surpass Chevron Corp CVX.

Shell currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

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BP PLC (BP): Free Stock Analysis Report
 
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ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
 
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
 
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