Sector Movers: M&A chatter perks up oil and gas, tech stocks

M&A chatter dominated trading in London, with oil and gas shares rising on the back of blue chip Royal Dutch Shell’s successful bid for smaller FTSE 100 rival BG Group.

At 15:40 BST on Wednesday, the FTSE 100 was marginally down 7.35 points or 0.11% at 6954.42 as the market soaked in news of BG Group’s takeover. The company’s board recommended Shell’s £47bn cash-and-shares offer to shareholders before the market opened.

The takeover, if approved, is expected to create the world's second-largest integrated oil company after ExxonMobil, and the world’s biggest private sector gas production company.

BG's chairman Andrew Gould said the deal represented "an attractive return" for shareholders, following a sharp slump in the share price over the last year, as the company had to declare a force majeure in Egypt and contend with general bearishness in the global oil markets.

Shell's bid values BG at around 1,350p per share; a 50% premium to its closing price of 910.4p on Tuesday. BG shares were trading up 256p or 28.19% at 1167p while other sector shares responded to the news in kind.

BP (up 1.7%), Ophir (up 7.9%) and Tullow (up 7.16%) were among the leading gainers. The same can’t be said of Shell as its ‘A’ shares (down 4.18%) and ‘B’ shares (down 7.9%) saw a sell-off when details of the BG bid surfaced.

The Anglo-Dutch oil producer said the deal will add 25% to its proven oil and gas reserves and 20% to production based on 2014 figures. Shell also reckons that buying BG would create pre-tax synergies of around $2.5bn per annum.

The oil and gas sector would have definitely finished atop all trading sectors but for late afternoon market chatter about a possible bid for ARM Holdings by Apple at a rumoured consideration price of 1,500p pushing the technology share index higher.

ARM Holdings' shares were trading up 1.91% or 21p at 1123p. Spirent, SRT and Laird were among a dozen technology sector shares in the green with the technology, hardware and equipment sector index rising 32.69 points or 2.51% to 1,336.01.

Elsewhere, metals and mining stocks displayed a fair bit of resilience as Japanese importers inked long-term deals, a highly anticipated interest rate cut by the Royal Bank of Australia failed to materialise, and investment banking firm Jefferies said sector blue chip stocks had proven resilient to headwinds for the time being at least.

The big trio of iron ore exporters Rio Tinto (down 0.30%), BHP Billiton (down 0.07%) and Vale (non-UK listed, up 5.32%) reaffirmed their plans to press ahead with a seven-year programme to add 430m tonnes of new iron ore supply onto the sea-borne market by 2020.

Top Five Sectors:

Technology, Hardware & Equipment 1,336.01 +32.69 +2.51%
Industrial Metals & Mining 1,957.92 +41.36 +2.16%
Oil & Gas Producers 7,373.42 +103.08 +1.42%
Healthcare equipment & services 6,913.36 +65.87 +0.96%
Forestry & Paper 14,368.28 +96.95 +0.67%