By Ron Bousso
LONDON (Reuters) – Royal Dutch Shell expects to slash thousands more jobs to save costs if its takeover of BG Group goes through as planned early next year following a final green light from China.
The acquisition, which was announced on April 8 & is biggest in the sector in a decade, has been cleared by China's Ministry of Commerce, Shell said on Monday, after earlier approvals from Australia, Brazil & the European Union.
Shell & BG will now send a merger prospectus to their shareholders & hold special general meetings for votes on the deal. If approved, it will face a court hearing 10 days after & could be completed by early February.
Some shareholders, however, have voiced concern over the merits of the acquisition following the sharp slide in oil prices. The fall in Shell's share price since April means the value of the deal has fallen to $53 billion (Â£35 billion) from $70 billion.
Shortly after announcing the green light from China, Shell issued a statement saying it expected to cut approximately 2,800 roles globally from the combined group.
That would be nearly 3 percent of the group's combined workforce of approximately 100,000, or equivalent to more than half BG's roughly 5,000 employees.
The Anglo-Dutch oil & gas company had already outlined steps to protect dividend payouts & cashflow following the merger, which include cost savings of $3.5 billion & $30 billion in asset disposals.
The new job cuts are moreover in addition to previously announced plans to reduce Shell's headcount & contractor positions by 7,500 worldwide.
Shell B shares were down 1.6 percent by 1217 GMT, while BG shares traded 0.3 percent lower.
A BG spokesman said the company would remain focussed on its business plan until the deal is completed.
The combination will transform Shell into the world's top liquefied natural gas (LNG) trader & a major offshore oil producer focussed on Brazil's rapidly-developing sub-salt oil basin that would rival Exxon Mobil's position as the world's biggest international oil company.
Shell has nevertheless had to battle a sharp slide in oil prices, which have fallen from $55 a barrel in April to below $40 a barrel, which some investors said undermined the deal.
"The deal doesn't make financial sense at the current oil price. You have received to be pretty bullish on the current oil price to make this deal work." David Cumming, Head of Equities at Standard Life Investments, told BBC Radio on Monday.
Analysts at Credit Suisse, however, said the deal still made strategic sense.
"Yes, it is tough when one looks at spot oil prices … We are in the camp of 'Yes', not just because of the strategic rationale longer term, yet moreover because of Shell's CEO & Chairman, who we think are the right people at the helm in this environment," the bank said.
Last month, sources told Reuters that the Chinese Ministry of Commerce had pressed Shell to sweeten long-term LNG supply contracts as the world's top energy consumer faces a large surfeit over the next five years.
The integration of the two companies has been planned by a joint committee in recent months yet could encounter some difficulties as BG's small & relatively nimble operations are merged with Shell's much larger structure.
(Additional reporting by Adam Rose; editing by Mark Potter & David Clarke)