Shell denies that it’s pursuing a bid for BP, says no talks underway; stock up

Investing.com -- Shell (NYSE:SHEL) (LON:SHEL) on Thursday denied it was planning a takeover of BP (NYSE:BP), saying it is not pursuing a bid and is not actively considering one.

The company also said that under U.K. regulations, making such a statement prevents it from making a formal offer for the next six months.

Shell’s U.S.-listed shares rose 2% in premarket trading on the news by 05:22 ET, while BP shares slipped nearly 1%.  

"Intensified speculation looks likely to see a degree of bid spec/ activism premium stick in BP shares for the immediate future," JPMorgan analysts said in a note. 

The response came after a Wall Street Journal (WSJ) report on Wednesday claimed Shell was in discussions to acquire BP.

“In response to recent media speculation Shell wishes to clarify that it has not been actively considering making an offer for BP and confirms it has not made an approach to, and no talks have taken place with, BP with regards to a possible offer,” the oil giant said in the release.

“This is a statement to which Rule 2.8 of the Code applies and accordingly Shell confirms it has no intention of making an offer for BP. As a result Shell will be bound by the restrictions set out in Rule 2.8 of the Code,” it added.

The WSJ reported that Shell was in “early-stage talks” to buy BP, citing sources familiar with the matter. The report said that the discussions between the two companies are “active,” with BP said to be weighing the approach “carefully.”

"We think market discussions are now likely to move towards trying to better understand the credibility and source of the latest news," UBS analysts commented.

"Shell may have denied talks are taking place but, no matter how unlikely a combination might be, we think the market will increase the probability of a deal happening, leading to an overhang on the shares in the near-term," they added.

"Any merger would require a rewriting of the Shell investment case which we believe, at least initially, would come to the detriment of shareholder confidence."

A potential acquisition of BP would present significant challenges for Shell, including a lengthy integration process, cultural differences, and likely divestments of overlapping assets.

However, such a move could expand Shell’s already significant trading footprint and strengthen its position in key areas like liquefied natural gas. 

Some analysts and investors believe the companies would be complementary in regions such as the Gulf of Mexico, now referred to by U.S. officials as the Gulf of America, the WSJ report added.

Under U.K. takeover rules, the six-month restriction on Shell making an offer for more than 30% of BP’s shares could be lifted if BP invites a bid or if a competing offer for the company is made.