Ben van Beurden is not wobbling – yet. Even as the price of a barrel of oil fell close to an 11-year low on Monday, the chief executive of Shell indicated, for the umpteenth time, that his group’s proposed £40bn takeover of BG Group will proceed as planned. His cue was a thumbs-up from China, the final regulator to pronounce favourably.
“This is a strategic deal that will make Shell a more profitable and resilient company in a world where oil and gas prices could remain lower for some time,” said Van Beurden. “We will now seek approval from both sets of shareholders as we move towards deal completion in early 2016.”
Not everyone is convinced. David Cumming, head of equities at Standard Life, told the BBC the takeover did not make financial sense at the current oil price. Shell is paying too much. In Cumming’s view, there are three possibilities: Shell walks away, agreeing to pay the £750m break fee; it seeks improved terms from BG; or shareholders vote against.
Cumming didn’t actually say Standard Life would vote against itself, which is a sign of the delicate politics at play. If Shell were to lose a shareholder poll on a £40bn acquisition, the result would be taken as a vote of no confidence in the board. Heads would have to roll. That is why, if Van Beurden is sufficiently bloody minded, he could probably prevail. Institutional shareholders rarely rebel against giant companies on matters of confidence.
But he would be unwise to push matters that far. Whatever he says in public now, he ought to be examining the option of renegotiation. The outlook in the market has transformed since the original terms were agreed in April, when oil fetched $65 a barrel. These days, the world is running out of places to store excess supplies. BG’s shareholders are getting the better end of this deal by far.
It’s no use Shell arguing that the equity component in the terms mean “both sets of shareholders share the benefits of the combination in any expected oil price environment”. That is true only up to a point. The terms also include cash of 383p a share – indeed, that is now worth almost 40% of the offer price, reflecting the fall in value of Shell’s shares.
It would, of course, be embarrassing for Van Beurden to attempt to secure better terms at this late stage. But embarrassment should not enter the equation. The best reason to pick up the phone is simple: in the current climate, BG’s board would surely have to agree to talk.
Spotlight must return to HBOS’s auditors
As the sorry tale of the failure of HBOS in 2008 is examined afresh, one actor in the drama has avoided the spotlight – KPMG, the bank’s auditors. The Financial Reporting Council (FRC), the accountancy watchdog, looked into HBOS’s provisioning for bad loans in its corporate lending division and decided KPMG had no case to answer.
Andrew Tyrie, chairman of the Treasury select committee, has been critical of that decision since it was made, calling it a “serious mistake”. On Monday, he was left “flabbergasted” on being told that the FRC didn’t even wait for the official report on HBOS before reaching its conclusion. There was a “lack of curiosity” at the FRC, reported Iain Cornish, adviser to the committee.
That is damning stuff for FRC, whose credibility rests on being seen to make its rulings transparently and in full possession of the facts. The body should do what Tyrie asks – re-examine its decision, and then explain itself if wants to stick to its guns. Just get on with it.
A Man’s man – but what else is on Livingston’s agenda?
Ian Livingston, the chief executive who helped haul BT off its knees and then quit to join the coalition government as trade minister, is a chap who might expect to resume life on the corporate merry-go-round in a senior saddle – the chairmanship of a decent-sized FTSE 100 company, say. In fact, Lord Livingston is set to chair Man Group, which is still a large hedge fund, even after the 2012-14 upsets with its trend-following black box, but is in no immediate danger of re-joining the FTSE 100.
He is a good high-profile hire for Man, which is looking to attract investors in the US and Asia, but it’s harder to see the appeal from Livingston’s point of view. There’s the chance to chew the cud with Man’s brainy multimillionaires, but that’s about it. One must assume Man will be Livingston’s junior chairmanship, with the bigger gig to be unveiled soon.