11 March 2016, London — Royal Dutch Shell has appointed investment bank Lazard to advise it on a $30 billion asset sale program following its acquisition of BG Group last month, banking and industry sources said on Friday.
The Anglo-Dutch company has also picked Bank of America Merrill Lynch and Morgan Stanley to work on proposed sales of assets, according to the sources, noting that more banks could yet be added to the line-up.
A Shell spokesman confirmed Lazard has been brought in under a new mandate to advise its merger and acquisition team on the company’s divestment strategy. It also confirmed BofA Merrill Lynch and Morgan Stanley have been appointed to work on some assets sales.
Lazard declined to comment. Morgan Stanley and BofA Merrill Lynch were not immediately available to comment.Shell has announced plans to sell $30 billion worth of assets between 2016 and 2018 in order to finance the BG deal as well as maintain its dividend following a sharp drop in oil prices since mid-2014.
“We don’t have a broker relationship with any one bank. We choose banks on project-by-project basis, on the basis of price and suitability. We expect several banks to bid for and get transaction mandates for our $30 billion asset-sale program,” the Shell spokesman said.
In a surprise move late last year, Shell’s board turned to Lazard for an independent review of the $50 billion BG acquisition as it sought to allay shareholders’ concerns over its merits in the face of plummeting oil prices.
Lazard’s latest role is a new mandate for the purely advisory player which has no lending capacity and has kept a relatively low profile in the oil and gas sector.
Identifying Sale Candidates
Lazard will help to identify suitable assets for sale and their potential buyers.
Chief Executive Officer Ben van Beurden has said Shell’s disposals would initially focus on the refining, storage and retail divisions, known as downstream, whose value has held up during the current downturn.
Oil and gas production assets, known as upstream, are more likely to be sold later once the oil price recovers, Shell has indicated.
Sources said Shell has decided “thematically” in which areas it would divest although it was yet to decide on specific assets within them.
Following the completion of the BG acquisition on Feb. 15, Shell officials have been going over both companies’ portfolios to identify “core assets” and others that can be put on the block.
Shell divested $5.5 billion worth of assets in 2015, including a refinery in Japan, North Sea assets and its retail business in Norway.
The mandate is a coup for Lazard.
The U.S. outfit was not among the original banks on the BG deal, which had BofA Merrill Lynch advising Shell while Goldman Sachs and boutique Robey Warshaw worked with BG.
Morgan Stanley, JP Morgan and Rothschild later joined the roster.
Boutiques have managed to compete with major Wall Street banks by touting the independence of their advice since they do not offer services such as lending and are usually paid regardless of whether the deal happens.
Lazard ranked sixth globally for M&A advisory last year, placing it just behind Citi, according to Thomson Reuters data.
The advisory firm earned $919 million in fees and captured a 3.5 percent market share, according to Thomson Reuters data, helped by roles on deals including the $46 billion merger of H.J. Heinz and Kraft Foods.
*Freya Berry & Ron Bousso; Sophie Sassard; Editing – Keith Weir – Reuters