BG Group rating boosted by SocGen after Shell offer

BG Group’s rating was upgraded to ‘hold’ from ‘sell’ by Societe Generale on Thursday after Royal Dutch Shell’s proposal to buy the oil producer on Wednesday.

SocGen said Shell’s offer amounts to a 40% premium to the BG closing price on 7 April.

At this level, Shell’s offer values BG’s equity at $65.2bn for an enterprise value of $77.4bn, said the French investment bank.

“In our view, it represents a fair price for BG, assuming oil recovers towards $80 per barrel by 2017 – at which level (SocGen’s) sum-of-the-parts value of 1,274p corresponds to the current value of Shell’s offer. We therefore upgrade BG’s rating,” SocGen said, while retaining a 1,275p target price.

The bank added that accepting the Shell offer immediately realises the value for BG’s investors that BG itself was unable to unlock, securing a material 40% premium.