Shell considers BP takeover as group valuation declines

British oil group BP saw its share price rise on the London Stock Exchange on May 6, driven by media reports suggesting Shell is considering a potential acquisition. According to sources close to the matter cited by Bloomberg on the same day, Shell is closely monitoring the situation but may wait for a further decline in both share prices and oil prices before making a move.

An operation that could exceed £200bn

If it were to materialise, a merger between the two majors would create a conglomerate valued at more than £200bn ($250bn), based on current estimates. No formal offer has been submitted at this stage, and both companies have declined to confirm the discussions. BP, contacted by AFP, stated it does not comment on “market speculation and rumours.” Shell referred to comments by its Chief Executive Officer Wael Sawan, who said on May 3 the group would “continue to evaluate opportunities” but currently prioritises share buybacks over a bid for BP.

A challenging context for BP

BP’s current valuation, estimated at £56bn ($70bn), is significantly lower than Shell’s, which stands at £149bn ($187bn). BP faces pressure from activist shareholder Elliott Management Corporation, which recently acquired more than 5% of its capital. The group reported sharply lower first-quarter earnings, with net profit falling more than threefold to $687mn, increasing market scepticism.

Mixed reactions on the markets

BP shares gained around 1% during the session after jumping 3.5% at the open. Meanwhile, Shell shares declined 1.5%, reflecting investor caution amid the uncertainty of a potential acquisition. “The idea of a Shell bid for BP has circulated for decades, but this time it feels different,” said Kathleen Brooks, an analyst at XTB, quoted by AFP.

Strategic decisions awaited from Shell

Shell also posted weaker first-quarter results, with net profit down one-third year-on-year. Despite this context, the group outperformed market expectations and continues to focus on shareholder returns through buybacks and dividends. No timeline or specific terms have been mentioned regarding a potential tie-up with BP.