Shell has denied its intentions to buy BP following reports of a potential deal worth around $80 billion.
Deal Denial
The London-based oil giant Shell stated on Thursday that it has 'no intention' of acquiring BP, after a report by The Wall Street Journal claimed Shell was in discussions to purchase its rival. Shell stressed it is adhering to its capital discipline strategy. BP declined to comment on the situation.
Questioning the Value of the Deal
Analysts are questioning the rationale behind such a deal. Allen Good from Morningstar noted that without an attractive valuation, buying BP would not yield real benefits for Shell nor resolve its growth issues. While the idea may look appealing on paper, the actual advantage depends on Shell cutting costs and disposing of BP's underperforming assets, which could face internal opposition. Good also remarked that selling BP might be the best course of action for the company’s shareholders.
Challenges of a Merger
Merging the UK’s two largest oil companies would raise immediate regulatory concerns. Analysts predict serious antitrust issues, especially in Europe, along with potential job cuts. Russ Mould from AJ Bell pointed out that any integration efforts would be extremely complicated and time-consuming. Nick Wayth, a former BP employee, confirmed that the merger process would be 'hugely complex with significant regulatory hurdles to overcome'.
The situation surrounding BP remains uncertain, and amidst ongoing challenges, the notion of a potential buyout continues to generate interest from analysts and investors.
