Standard Life says no to Shell buy

In a move to prevent Shell from blowing a huge amount of cash has the insurer’s investment arm going on the offensive to prevent the oil giant from making an acquisition that’s clearly value destructive for shareholders

Standard Life Investments, one of the biggest shareholders in Royal Dutch Shell Plc, said it would vote against the company’s plan to buy BG Group Plc. 

“We have concluded that the proposed terms of the acquisition of BG are value destructive for Shell shareholders,” David Cumming, head of equities at Standard Life Investments, said in a statement Friday. “We shall vote against the deal” because of “downside risks” to Shell’s oil price assumptions and tax and operational risks at BG’s Brazilian assets, he said.

Standard Life is one of the first investors to publicly disclose how it will vote on Shell’s plan to buy BG, valued at about $70 billion when it was announced in April. The deal is on the brink of completion, but oil’s collapse to less than $35 a barrel from about $55 when it was unveiled has prompted some investors to question whether the company is paying too much. The transaction won backing Friday from Institutional Shareholder Services, which advises many of Shell’s largest investors.

“We are confident the deal retains broad shareholder support and will complete as expected,” a Shell spokesman said.

Standard Life Investments holds 0.4 percent of Shell’s A shares and 1.7 percent of the B shares, making it the 11th- biggest holder. It is also the 16th biggest investor in BG with a 1.3 percent stake, according to data compiled by Bloomberg.

Standard Life has asked Shell to re-negotiate the terms of the deal, Guy Jubb, head of governance and stewardship, said in the statement.

Shell, Europe’s largest oil company, has justified the BG deal by saying it would boost its ability to maintain dividends, make it the world’s largest LNG producer and give it new assets from Australia to Brazil. The transaction remains on track for completion early this year, Chief Executive Officer Ben van Beurden said in an interview published on Shell’s website Friday, before the Standard Life statement.

Shell’s shareholders are scheduled to vote on the deal on Jan. 27, with BG following the next day. Shell requires the backing of 50 percent of its holders. In BG’s case, votes in favor must represent at least 75 percent of the total value of the company’s shares.

Rakteem Katakey
Bloomberg News