There are still many kinks to iron out, and the deal has to get the green light from regulators. Whats more,Shell could decide to walk away if the numbers dont stack up
BG has been struggling for some time, and the groups recent set of results highlighted the companys troubles. Specifically, BGs first-quarter net profit fell 51% to 366m and revenue slumped by 21% to 2.6bn as weak oil prices weighed on group profits.
Additionally, oil & gas production only increased by 1% year on year as production growth within Brazil and Australia was offset by falling production elsewhere.
Still, Shell is overly concerned about BGs short-term results. The company really wants to get its hands on BGs valuable oil & gas reserves. Acquiring these reserves will transform Shell into the worlds second-largest oil & gas producer, and the largest liquefied natural gas producer.
But Shell has a number of issues to overcome before the deal completes and these could put the company off BG.
It has emerged within the past week or so that when BG and Shell finally combine, BGs existing employees will have to compete with each other to keep their jobs.
Shell is looking to slash costs at the enlarged group by around $2.5bn per annum by 2018. 1,200 of BGs 5,000 employees are located within the UK, and its likely that the axe will fall here first, before moving to the international employee base.
However, there are already some concerns that BGs most talented employees may choose to leave, rather than jump through hoops to compete for jobs at Shell. One of BGs managers has gone so far as to say that some of the companys employees are genuinely upsetthat BG is losing its autonomy and the deal is going ahead.
Not much experience
Shell has almost no experience doingmergers of this size. The company did not participate in the energy mega-mergers of the 1990s that created the international energy behemothsExxonMobilandChevron.
Therefore, some analysts are wondering out loud if Shell can pull off the integration without any major hiccups.
Indeed, Shell and BG are very different businesses, despite operating in the same industry.
BG is known for swift decision-making and go-go mentality. On the other hand, Shell is a company that prefers the slow-and-steady approach. It has become known as ahierarchical and bureaucratic organisation.
AndBGs go-go style has helped the group leap to the top of the oil sector over the past two decades. In the 15 years to 2012, BG made 16 vast oil discoveries, a record unmatched by other majors.
However, BGs management style has hampered the development of these projects. Shell, on the other hand, has the skills required to develop these discoveries over the long-term, on time and on budget.
All in all, Shell and BG are two very different companies, and their 55bn merger could still fall apart.
Its all down to BG and Shells management teams and the way they decide to go about integrating the two businesses.
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