According to sources in the Wall Street Journal, negotiations have begun on a historic merger in the energy sector: Shell is reportedly negotiating the acquisition of rival BP, according to the Wall Street Journal. Shell, a British company, would thus gain great strength to compete with rivals Exxon Mobil and Chevron; the merger would thus take place between two of the “supermajors” of oil, as the multinationals that dominate the world’s fossil fuel production are called.
However, we are currently at a stage of mere discussion on the matter, where the potential terms of the deal, let alone its feasibility, are unknown. However, in-depth but slow-moving talks between representatives of the two companies are reportedly ongoing. Following publication in the Journal, Shell branded the matter as “further market speculation,” adding that “there are no ongoing negotiations.” A BP spokesman, on the other hand, declined to comment.
The figure at which the possibility of BP’s purchase looms could make it the most expensive transaction in history in the oil industry, surpassing the merger in the early 2000s between Exxon and Mobil. BP’s current valuation is around $80 billion, which, with the purchase premium added on top, would likely exceed the $83-billion Exxon-Mobil merger.
Shell currently has a strong position at the negotiating table, thanks to a stock performance in recent years that is far superior to BP’s. For its part, the latter has been slowing down compared to its competitors due to a poorly managed energy transition and managerial and operational mishaps. Elliott Investment Management—an activist investor holding 5 percent of BP’s shares—has long called for changes at the company, citing the its vulnerability to takeover bids. Bloomberg News previously reported the possibility of a takeover by Shell in early May.
It should be noted that under Britain’s rules on acquisitions, a London-listed company is prohibited from officially denying negotiations without incurring a six-month lockout from the acquisition process. While there has been no official denial by Shell, the statements already made could trigger this restriction.
