Media reports are surfacing stating that UK oil titan BP and its fellow player Shell could be planning a friendly merger, in a deal that would create a £250 billion oil behemoth.
According to The Times, the deal would create synergies resulting in £2.5 billion cost savings. It has been reported that the merger was previously discussed by BP and Shell while the former company was still under its previous CEO Lord Browne. However, now that Tony Hayward has taken over Lord Browne's position, BP seems to have revived the talks. According to The Times, rumors are rife that executives of the two companies are currently negotiating a friendly deal with financial advisors.
The Daily Mail has speculated that if the deal goes ahead, it would mark the climax of the recent spate of global takeover activity. The publication also reported that the industry believes that the deal would be a prudent move, as it would knock current industry leader ExxonMobil off the top spot, by creating a global player that would produce 70% more oil and gas than the US firm. The Daily Mail also commented that although the two companies would have to dispose of a number of assets, the cost savings and enhanced efficiency would make this a worthwhile move.
According to The Daily Mail, Shell's A-shares increased £0.33 on the news to £20.67, while its B-shares rose £0.31 to £21.14. BP shares also reportedly rose £0.01 to £6.04. However, the publication revealed that both Credit Suisse and Morgan Stanley believe that Shell is being significantly undervalued. (Energy business review)