Shell Plc on Thursday issued a categorical denial of speculation it was pursuing a takeover of rival energy firm BP Plc, stating unequivocally that no offer had been made or even considered. The statement came in response to a Wall Street Journal report citing unnamed sources who claimed Shell had initiated early-stage 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," Shell stated.
Under the UK Takeover Code, Shell's declaration now subjects it to a six-month restriction from making a new offer for more than 30% of BP's shares unless certain exceptions arise, such as BP inviting a bid or a third-party offer emerging.
Shell emphasized that it was issuing a Rule 2.8 statement, which is binding under UK regulations. "Shell confirms it has no intention of making an offer for BP," the company reiterated.
The speculation of a mega-merger between two of Britain's most iconic energy companies had sparked interest earlier this month, briefly lifting BP's share price. However, Shell's CEO Wael Sawan has repeatedly signaled his preference for returning capital to shareholders rather than engaging in large-scale acquisitions.
"We will always look at these things, but you are also looking to see what is the alternative," Sawan told the Financial Times earlier this year. "Right now, buying back Shell [shares] for us continues to be absolutely the right alternative to go for."
Shell reported $23.7 billion in earnings for fiscal year 2024 and said it achieved $3 billion in cost savings since 2022, ahead of its internal targets. BP, meanwhile, has struggled to keep pace with rivals following its strategic shift toward renewable energy investments beginning in 2020, which left it trailing as oil and gas prices surged.
Elliott Investment Management, an activist hedge fund with more than a 5% stake in BP, has pushed for the company to trim costs and increase profitability. Sources familiar with Elliott's position said the fund believes BP has room to optimize operations further.
"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," UBS equity analyst Joshua Stone wrote in a note to clients.
Stone added that BP shareholders, particularly Elliott, would likely demand a significant premium in any potential transaction. "Yet, for the same logic as on Shell, the latest news likely means some level of acquisition premium lingers within the shares, providing a floor for the valuation," he said.
