Shell takeover of BG – Mix and Match offer! 1


Just over a week ago, Shells take-over of BG was officially confirmed as both sets of shareholders voted in favour of the deal. The deal on offer is that Shell will give BG shareholders 0.4454 RDSB shares + 383p for every BG stock they hold. As an alternative to this, BG shareholders can elect for the Mix and Max facility – they can elect to vary the proportions in which they receive New Shell Shares and cash, subject to the elections by other Scheme Shareholders.

As a BG shareholder, the mix and match offer from Shell is an interesting proposition as it gives me the opportunity to pick the right mix in order to maximise the value (and returns I get from the deals).

What are the options for BG shareholders under the Mix and Match Facility.

These are the options my dealer sent me and I need to chose the option I think is best for me:

  1. Cash/B Shares (Default) – For each Scheme Share held, Shareholders will receive 383 pence and 0.4454 Shell B Shares.
  2. All Cash-B Shares if scale back – Under this option, Scheme Shareholders can elect to exchange the share consideration of 0.4454 New Shell Shares for each Scheme Share held for cash. In the event that any such election cannot be fully satisfied and is scaled down, Scheme Shareholders will receive 383 pence in cash and 0.4454 Shell B Shares in respect of each Scheme Share for which this election is not satisfied.
  3. All Shares – B Shares – Under this option, Scheme Shareholders can elect to exchange the cash consideration of 383 pence for each Scheme Share held for Shell B Shares. In the event that any such election cannot be fully satisfied and is scaled down, Scheme Shareholders will receive 383 pence in cash and 0.4454 Shell B Shares in respect of each Scheme Share for which this election is not satisfied.
  4. A Share Alternative-Cash/A Shares – Under this option, Scheme Shareholders can elect to receive 0.4454 Shell A Shares (instead of 0.4454 Shell B Shares) and 383 pence in cash for each Scheme Share held.
  5. All Cash-A Shares if scale back – Under this option, Scheme Shareholders can elect to exchange the share consideration of 0.4454 New Shell Shares for each Scheme Share held for cash. In the event that any such election cannot be fully satisfied and is scaled down, Scheme Shareholders will receive 383 pence in cash and 0.4454 Shell A Shares in respect of each Scheme Share for which this election is not satisfied.
  6. All Shares – A Shares – Under this option, Scheme Shareholders can elect to exchange the cash consideration of 383 pence for each Scheme Share held for Shell A Shares. In the event that any such election cannot be fully satisfied and is scaled down, Scheme Shareholders will receive 383 pence in cash and 0.4454 Shell A Shares in respect of each Scheme Share for which this election is not satisfied.

The best option under Shells Mix and Match facility.

I should mention right from the offset that there is no right option or one size fits all option under the mix and match facility. The option you choose will depend on your own personal situation and the way you see oil prices panning out. If you fell that oil prices will fall, it will be best to get the All Cash option so that when the shares in RDSB drop with the oil price, you can buy in at a cheaper price and thus get more bang for your buck. On the other hand, if you fell oil prices are going up, it is best to get the all share option.

For me the best looking options are 1 and 3 above. I do not want Shell A shares (RDSA) as the dividends paid out by this share class are subject to dividend withholding tax. I also do not want the all cash offer as I think Shell is a wonderful company that will deliver great long term returns for shareholders as these prices.

So lets look at options 1 and 3 above.




Option 1 – 0.4454 RDSB shares + 383 p for every Bg share.

As I have 67 shares of BG, it means that I will receive
29.8 RDSB shares and £256.61.

With the current RDSB price of 1536, this gives me a total value of £714.33. Considering I bought the shares in december for £644.31, this is not a bad short term return at all!

(Note: I am not sure what the procedure is with fractional shares. I do not know whether I will get 29 shares and the cash equivalent for the 0.8 fractional share or I will get 30 shares with less cash which paid for the 0.2 fractional share).

Option 3 – All B shares.

I recently contacted my broker to see how this works as the prospectus was not clear on how the additional B shares will be calculated. This is what my broker had to say, the number
of B shares will be worked out as follows:
Customers will receive the default, and then the cash portion is used to buy as many B shares as possible at the share value on a specific date. It is likely that this date will be the 15th February, however this date is subject to change dependant on director decisions.

So for my 67 BG shares, I will get
29.8 RDSB (shares) default and 16.70 RDSB shares going by the Shell share price at close yesterday as mentioned above.

Looking at the 2 options, the value I will get is the same, which is equivalent to £714.33. The major difference in what will sway my judgement into picking one option avower another is where I see RDSB shares going in the future. If I see it rising, Option 3 is certainly the best as the 16.70 extra shares will be worth much more than the £256.31 cash I receive under option one. If on the other hand I believe that the RDSB price was going to fall, Option 1 would be best as the £256.31 in cash I receive will be more valuable than the 16.70 extra shares received under option 2.

As you can see, choosing an option under the mx and max facility it is not an easy task. But I need to make my decision quickly as the deadline my broker has set is 9 February 2016 for me to make a decision.

What mix and match option are you taking? Which do you think will deliver the best long term returns?




Update: The terms of the Mix and Match offer

Shell has posted an update this morning giving information regarding the mix and match facility. This is briefly whatit has to say:

Information regarding the Mix and Match Facility

Scheme Shares representing approximately 17.11 per cent of the aggregate number of Scheme Shares subject to a Mix and Match Election were also subject to a Shell A Share Alternative Election. Accordingly, the Mix and Match Reference Price is 1468.05915613 pence.

Share Elections in respect of 379,114,767 Scheme Shares, representing approximately 11.08 per cent of the aggregate number of Scheme Shares, and Cash Elections in respect of 163,080,849 Scheme Shares, representing approximately 4.77 per cent of the aggregate number of Scheme Shares, were made by BG Shareholders. The ability to satisfy Cash Elections and Share Elections was dependent on other Scheme Shareholders making equal and opposite elections.

Scheme Shareholders who made valid Cash Elections have had such elections satisfied in full. In respect of Scheme Shares for which a valid Cash Election has been made, Scheme Shareholders will receive 1036.87354813 pence per Scheme Share.

Scheme Shareholders who made valid Share Elections have had such elections scaled down on a pro rata basis by approximately 26.56 per cent. In respect of the Scheme Shares for which a valid Share Election has been made and which has been satisfied, Scheme Shareholders will receive 0.7062886695 New Shell Shares per Scheme Share. In respect of the Scheme Shares for which a valid Share Election has been made and which has not been satisfied due to the scale down, Scheme Shareholders will receive the default consideration, which is 383 pence in cash and 0.4454 of a New Shell Share, per Scheme Share.

Scheme Shareholders who did not make valid Cash Elections or Share Elections have not participated in the Mix and Match Facility. In respect of Scheme Shares for which no valid Cash Election or Share Election has been made, Scheme Shareholders will receive the default consideration, which is 383 pence in cash and 0.4454 of a New Shell Share, per Scheme Share.

According to my understanding, the information released by Shell on the mix and match offer mean the following:

  • If no election election made – You get the default offer of 383 pence in cash and 0.4454 of a New Shell Share
  • If Cash election made – This will be satisfied in full.  According to my understanding of the above, this is £10.36 for each BG share you hold.
  •  If Shell B election made – This has been scaled back. Thus on 26.56% of your BG holding you will get the default 0.4544 shares in RDSB and £3.83 in cash. On the remaining 73.44% of your BG holding you will get 0.70628867 shares in RDSB and no cash.

So In essence, if you had picked the option where you get only Shell B shares , you would get the following under the scale back: 0.637 RDSB shares per BG, plus £1.017248 cash per BG share. The RDSB shares will be rounded down, and any additional entitlement would be converted to cash. 

The date for receiving  cash from the Shell-BG deal is 29 February 2016.

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