Market report: Shell offer for BG Group good deal for shareholders, says Investec

Shell’s £47bn offer for BG Group may be heaven-sent for corporate advisers such as Goldman Sachs and Robey Warshaw, but what about the army of shareholders who actually own the takeover target?

According to analysts at Investec, they’re getting a good deal, with Shell set to pay a large premium at 1,350p. BG Group shares closed up 9p to 1,177p while Shell also rose 17.5p to 2,065.5p.

“We did not believe that its longer-term growth options, beyond Brazil and Australia, justified [BG’s] premium valuation being sustained. Nor did we believe that it would be the subject of a takeover bid at such a sizeable premium. Clearly, Shell has disproved our thesis,” analyst Neill Morton said, upgrading BG from sell to hold.

Aviva also climbed 6.5p to 561.5p as it completed its £5.6bn takeover of rival Friends Life, a deal that will create the UK’s leading insurance, savings and asset-management business by number of customers.

Barclays resumed its coverage with an overweight rating, saying the combination of the two firms would immediately strengthen Aviva’s balance sheet and significantly improve its cash generation. JPMorgan also saw the benefits of the deal, and Morgan Stanley named Aviva as one of its top picks in the European insurance sector. Aviva shares have rallied about 50 per cent since Mark Wilson took over last year.

The insurer couldn’t drag the wider index with it and the FTSE 100 pulled back from last week’s record highs, falling 25.47 points to 7,064.30, as weak economic data from China weighed on mining stocks.

The sector was dealt another blow as Citi downgraded its stance on the entire metals and mining industry. BHP Billiton was among the top fallers on the Footsie, off 47.5p to 1,416p, and Anglo American dropped 23.3p to 998.7p. On the mid-cap index, Vedanta was down 0.5p at 517.5p.

Pearson was also in the red after Jefferies and Liberum gave downbeat views on its prospects. Liberum said LinkedIn’s recent purchase of online education site Lynda.com meant the Financial Times-owner now faces another major competitor. Jefferies also cut its rating to underperform from buy. Pearson shares fell 28p to 1,443p.