Shell-BG Group takeover expected to spark M&A fever in oil sector

The deal sparked speculation that it may mark the start of a new round of industry consolidation, not seen since the late 1990s, as businesses adapt to the new norm of depressed crude prices.

BG was trading nearly 38% higher at 1,252.16p by 09:22 after Shell's bid valued the group at around 1,350p per share, a 50% premium to its closing price of 910.4p on Tuesday.

Shell chairman Jorma Ollila said the deal will result in a "more competitive, stronger company for both sets of shareholders in today's volatile oil price world".

The takeover is expected to create the world's second-largest oil company after ExxonMobil and the biggest gas producer.

Smaller producers such as BG Group have dropped sharply over the past year - down nearly 30% before this week - with oil having halved in price, while big oil names such as Shell and BP have posted only moderate falls.

Accendo Markets trader Marc Kimsey said the moves have left the larger companies "in the position of predator rather than prey".

Similarly, Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said the deal could "prompt other companies who have been running the slide rule over potential targets to make their move".

Tullow Oil jumped nearly 10% on the news, while Afren surged 3%, Ophir Energy gained 7% and Genel Energy advanced 8%.