Shell denies BP bid and rules out takeover for six months

Shell (SHEL.L) has not bid for BP (BP.L) and is not actively considering such a move, it said in a categorical denial on Thursday, adding it was bound by UK rules which mean such a statement bans it from bidding for BP for the next six months.

The Wall Street Journal cited sources on Wednesday saying that Shell was in talks to acquire BP, in response to which Shell said no talks were taking place. Shell’s CEO Wael Sawan has repeatedly said buying back Shell shares was a better use of money when asked about a potential bid for 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 said in a statement.

“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.”

Under the UK’s Takeover Code, the six-month ban on making an offer for over 30 per cent of BP’s shares can be shortened if another bidder for BP emerges or if BP invites an offer, according to the regulations.

BP’s stock has underperformed its peers markedly since 2020 when its pivot to renewable energy left it lagging behind when global and gas prices surged.

Activist hedge fund Elliott has a stake above 5 per cent in BP, with sources familiar with the situation saying Elliott thinks BP could cut costs and investments further to improve profitability.

BP has repeatedly been the subject of takeover rumours, but analysis of its disclosures shows the British energy firm may not be as cheap as its market capitalisation would indicate.

“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,” said UBS equity analyst Joshua Stone.

“For BP, we think the likely premium demanded by BP shareholders (including Elliott) also complicates matters and makes a deal harder. 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.”