Shell announces it will not be buying BP and UK rules prohibit bids for six months

Shell denied that it had bid for BP or was actively considering it in a categorical statement on Thursday. It added that it was bound to UK rules, which means such a declaration would prevent it from bidding for BP within the next six-month period.

The Wall Street Journal cited on Wednesday sources claiming that Shell was in negotiations to acquire BP. Shell responded by saying no discussions were underway. Shell CEO Wael Sawan said repeatedly that buying back Shell shares is a better way to spend money in response to a possible bid for BP.

Shell issued a statement saying that "in response to recent media speculation Shell wishes clarify that it had not actively considered making an offer for BP. It confirms it hasn't made an approach and no discussions have taken place regarding a potential offer."

Shell confirms that it does not intend to make an offer to buy BP. Shell is therefore bound by Rule 2.8.

According to regulations, the six-month prohibition on making an over 30% offer of BP shares can be shortened if a new bidder emerges for BP or if BP accepts an offer.

BP has been underperforming its peers since 2020, when it's pivot to renewables left it behind as global gas and oil prices soared.

Activist hedge funds Elliott and Elliott Capital have a stake of more than 5% in BP. Sources familiar with the situation say that Elliott believes BP can cut costs further, as well as invest more to increase profitability.

BP is often the subject of takeover rumours. However, an analysis of the company's disclosures suggests that it may not be as cheaply priced as its market capitalisation might suggest.

Joshua Stone, equity analyst at UBS, said that any merger would mean a rewrite of Shell's investment case, which, we believe, initially would be detrimental to shareholder confidence.

"For BP we believe the likely premium requested by BP shareholders, including Elliott,?also complicates things and makes a transaction harder." For the same reason as Shell, we think the recent news will likely mean that some level of premium remains in the shares. This provides a floor to the valuation.

(source: Reuters)