Shares in BP (BP) leaked today on reports that a key executive at rival Shell (SHEL) tried and failed to convince his colleagues to make a takeover bid for the ailing oil giant earlier this year.
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Takeover Pitch Falls Flat
According to a report in the Financial Times, Shell’s head of mergers and acquisitions, Greg Gut, argued back in the spring that BP’s plunging share price at the time – see below – and management turmoil as it pivoted away from a renewable to fossil fuel focus, presented it with an opportunity to boost further growth.
While Sir Andrew Mackenzie, Shell’s chair, was said to be interested in Gut’s pitch, chief executive Wael Sawan and chief financial officer Sinead Gorman felt that the challenge of combining two of Britain’s biggest companies would instead derail its strategy.
This lukewarm response led to the report said, Gut deciding to leave the business back in the summer.
“There was a moment to buy BP, when the chair had left and the chief executive was wobbly, [but] that moment has passed,” the paper quoted one oil and gas investor briefed on the situation as saying.
Shell’s Public Denial
Shell publicly denied in June that it had made a bid for BP, saying it was constrained by UK takeover rules, which barred it from pursuing BP for six months following that statement. That restriction is due to expire on December 26, known as Boxing Day in the U.K.
There had been some speculation that Shell might return with a bid after that deadline had passed, but today’s revelation has put a lid on that.
“If accurate, this would heavily hint that Shell is unlikely to return with a bid after the restrictions on its ability to do so expire on Boxing Day,” said AJ Bell investment director Russ Mould. “Completing any deal would involve absorbing a considerable debt pile, and combining two businesses with different cultures would have been demanding and potentially have derailed Sawan’s continuing efforts to drive Shell forward. However, the question remains about how rapidly Shell can grow its portfolio organically and whether it can compete with its US counterparts on other deals.”
Despite the turmoil, a series of new oil and gas deals has bolstered BP and its share price in recent months. Who needs Shell anyway, some might ask.
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