Shell has said it has “no intention” of making an offer for the rival fossil fuel company BP after speculation it had been planning a £60bn takeover, ruling out a formal approach for the next six months.
In an official statement to markets on Thursday, the company doubled down on the previous day’s denials that it was planning a bid, after media reports that it was in early talks with its competitor to create a £200bn UK oil supermajor.
Shell said it had not been actively considering making an offer for BP, adding it “has not made an approach to, and no talks have taken place with, BP with regard to a possible offer”.
Shell toughened its stance against the growing market speculation by making the statement under rule 2.8 of the UK’s takeover code, a set of rules governing mergers and takeovers of listed companies.
The company said it would now be bound by the restrictions set out under the rule, which means Shell will be blocked from making a formal offer to buy BP for at least half a year except in specific circumstances.
Shell could make an offer sooner than six months if there was a material change of circumstances, including if another company made a bid for BP, or if Shell had the agreement of BP’s board.
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The official denial came after Shell issued a statement late on Wednesday to quash media reports it was in early talks to buy BP.
The company referred to a Wall Street Journal report that first raised claims of early talks between the companies as “further market speculation”. It added that “no talks are taking place”.
The market has been gripped by speculation that Shell would use its recent run of better-than-expected profits to make a play for its struggling rival while its market value is low.
BP has lost almost a third of its market value in the past year and is now worth about £58bn, after a turnaround plan by its chief executive, Murray Auchincloss, failed to convince investors that it could recover from a botched attempt to become a net zero energy company.
Its ill-fated green strategy was first put in place in early 2020 by the former chief executive Bernard Looney, who began to backtrack from his pledge to cut BP’s oil production by the end of the decade when Russia’s invasion of Ukraine in early 2022 led to soaring global energy prices. Looney was later ousted by the BP board for failing to disclose personal relationships with his staff.
The tribulations had already made BP a target for the feared activist hedge fund Elliott Management, which had been expected to use its multimillion-pound stake in the company to call for sweeping changes, including a new chair.
Helge Lund, who appointed Looney and was in charge while the share prices plunged, announced plans to step down as the chair shortly before shareholders at BP’s AGM in April voted for him to leave. He is expected to exit the role officially next year but a successor has yet to be named.
Shell’s chief executive, Wael Sawan, was earlier this year forced to deny the company’s rumoured plans of a BP takeover, saying the company was more interested in buying back its own shares than buying a rival.
According to the new WSJ report, talks between company representatives were moving forward slowly while BP carefully considered an approach, but it added that a final deal to create a new oil company remained far from certain.
Dan Coatsworth, an investment analyst at AJ Bell, said a BP tie-up with Shell would be a politically more palatable outcome for the UK government than if a foreign-owned entity made a bid. “If Shell doesn’t move on BP, there’s a good chance someone else will,” he said.
However, he suggested that if Shell were to move ahead with a bid for BP in the future it might struggle to get all of its large shareholders to support the takeover.
“Investors might not welcome the acquisition of a messy company and it would make Shell a higher-risk investment,” Coatsworth said.
“There might be several years of management distraction on integrating the business and finding buyers for any inherited assets that are deemed non-core. Investors might simply take the view that Shell is already well-served by its current assets and a BP takeover would give it indigestion.”
A Shell spokesperson said: “We remain focused on delivering more value with less emissions through performance, discipline and simplification.”
