Market Report: Shell-BG merger gets City backing despite oil slump

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Will they, won’t they? 

We’re not talking about US interest rates for once, but the $47 billion (£30.46 billion) tie-up between oil giants Shell and BG.

The oil-price slump has had investors in a panic about whether a deal would be off the cards, but analysts at Liberum Capital are convinced the pair will wrap things up, which they think will be better news for shareholders of BG, down 12.2p at 982.6p, than Shell, 20p cheaper at 1593.5p.

Analyst Jean-Pierre Dmirdjian upgraded BG to buy, but stuck to his hold recommendation for Shell, whose executives have been bullish about the oil price.

That makes sense when you consider Liberum thinks Shell will only turn a profit post-merger at $70 a barrel, which is some $20-odd higher than the current price. 

To seal a deal, Shell needs to win over regulators in China and Australia, as well as the shareholders of both groups.

Meanwhile, Dmirdjian said investors are too worried about a cut to BP’s dividend and boosted its rating to buy on the day the company appealed against the US ruling that it rigged gas markets in Texas in 2008.

However, more woes for the oil price hurt the sector and BP’s shares fell 2.5p to 329.5p.

Traders again played the “wait and see” card, holding fire ahead of Thursday’s crucial decision on US interest rates, dragging the FTSE 100 down 51.94 to 6032.65.

Tumbling thermal coal prices took their toll on shares in the world’s largest exporter, Glencore, which crashed 7.55p to a new, all-time low of 120.35p.

Aberdeen Asset Management, 2.6p lower at 309.8p, shrugged off concerns about an emerging-markets meltdown to buy Advance Emerging Capital, which oversees £409 million of funds.

Shares in oil explorer Rockhopper climbed 0.25p to 43.75p as it hailed a “fantastic start” to its exploration in the Falklands with two significant finds.

A solid, full-year trading update from professional music-equipment maker Focusrite hit the right note with investors and shares gained 3.5p at 160p.


TLA Worldwide, the AIM-quoted sports agency backed by former Tory treasurer Lord Ashcroft and Saracens chairman Nigel Wray, edged up 0.5p to 59.5p despite swinging to a $1.4 million loss in the first half of 2015. 

The deficit was a result of the ESP acquisition in March — a $19.5m deal that added Olympic stars Sir Chris Hoy and Rebecca Adlington to its books and gave it more exposure in the UK and Australian sports markets.

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September 15, 2015 |
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