Shell has formally denied any intention to buy BP Plc, with the solemnity of a Buckingham Palace statement. No discussion, no approach, not even a wink. The denial was so categorical that, according to British takeover rules, it automatically triggers a six-month ban on any takeover attempt—unless, of course, another suitor comes forward or BP decides to play hard to get.
The source of the rumor? An article in the Wall Street Journal, citing sources "close to the matter," which claimed that Shell and BP were discussing a merger. This is not the first time this has happened recently. Shell responded with a resounding "no," reinforced by a reminder from CEO Wael Sawan that he would rather buy Shell's shares than BP's. A polite way of saying, "The bride isn't pretty enough."
And yet, the idea is not absurd on paper. BP has been lagging behind on the stock market since 2020, the year of its major conversion to green energy. It was a commendable shift, but disastrously ill-timed, coming just before oil and gas prices skyrocketed. Shell, meanwhile, has quietly shelved its climate ambitions and returned to hydrocarbons like a lover returning to their first love: without shame, but with caution.
In the shadows, Elliott Management, the well-known activist hedge fund, holds over 5% of BP's shares. Its fixated idea: reduce spending, cut projects, increase dividends.
But there's a catch: BP isn't that cheap. Beneath the surface of a weak share price lies a company that is neither a bargain nor easy to digest. And for Shell, attempting a merger with BP would be tantamount to undermining its own argument to investors: budgetary discipline, returns, stability... all of that would have to be rewritten.
As UBS analyst Joshua Stone soberly points out, a merger "would require rewriting Shell's investment case," which would undermine shareholder confidence. Translation: the markets are likely to hate it.
So yes, the answer is a firm no, but it's probably not a final farewell. The energy sector has a long memory, a sensitive ego, and a habit of returning to bad ideas as soon as regulations allow. See you in December.
