BG chairman wooed by Shell around his wedding

How Shell swooped on BG Group Last month was a busy one for Andrew Gould, chairman of BG Group. He got married. And he sealed the biggest energy deal in more than a decade.

The two events converged in a flurry of transatlantic flights. On the eve of Mr Gould's wedding at the end of March, Shell boss Ben van Beurden flew out to meet him in Calgary, the Canadian oil capital, and presented a revised offer for BG. The pitch worked. BG's board met three days later and approved the deal.

Last Wednesday, the two men stood together at the London Stock Exchange to announce that Shell would buy BG for £55bn, including debt, in a combination that would reconfigure the global energy landscape.

The deal was put together with a speed that is unusual in the world of oil mergers and acquisitions. The formal announcement came just 24 days after Mr van Beurden first phoned Mr Gould to propose a deal.

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The rapid pace reflects the closeness of the two companies. BG's previous chief executive was a Shell veteran, there are deep cultural ties between the two, and Shell has run its slide rule over BG many times in the last two decades. Rumours of a potential combination circulated for years.

But this time, the environment was propitious. The slump in oil prices had dragged down BG's share price, and Shell badly needed to augment its reserves of oil and gas and boost its flagging production.

Shell also had a new CEO. Mr van Beurden took the reins last January, and set out to turn Shell round. By the summer he had assembled a project team to look at BG.

An off-site location was set up in the Netherlands where senior Shell executives, led by Gerard Paulides, the company's head of M&A, looked at the options. Soon, advisers from Bank of America Merrill Lynch were also brought in. Initially, BG was one of several possible acquisition targets; but ultimately it emerged as the favoured option.

Once BG was selected, Mr van Beurden and his team had to convince Shell's board, a task that was complicated by the fact that Shell's chairman, Jorma Ollila, was stepping down, to be replaced by Chad Holliday, the former chairman of Bank of America.

Ultimately, both men came round to the idea, persuaded by the compelling strategic logic of the deal. Shell would see its production rise 20 per cent: and cement its position as a global leader in liquefied natural gas and deepwater oil.

On March 12, Shell's board approved making an offer. The following day, Mr van Beurden called Mr Gould to request a meeting.

The two met in a private room in the Dorchester Hotel in central London two days later. It was not the easiest of encounters. Mr van Beurden, 56, was a relative unknown when he was chosen to lead Shell in 2013, while Mr Gould was one of the biggest names in the oil industry, a patrician 68-year-old who for years ran oil services giant Schlumberger.

"Andrew's personality can make him a bit prickly at times [and] he didn't have a glowing view of Shell," said one person familiar with the talks. But the meeting went smoothly. "There was a genuine rapprochement," the person said. "They got on well and liked each other."

Mr Gould, however, felt conflicted. After a long period of turmoil, marked by profit warnings, operational problems and management upheaval, BG appeared to be coming around. The group had also just appointed a heavyweight new chief executive - Helge Lund, the former boss of Norwegian major Statoil.

"Having gone through all the pain over the past three years, and attracted Helge, we were both looking forward to running BG as an independent company," Mr Gould said in an interview.

But the external environment was perilous. Oil markets remained volatile, and the risks associated with Brazil and other places where BG operated getting worse, not better, Mr Gould says. So when Shell came along with its offer, "we felt our duty to our shareholders was to recommend it".

The next day, Shell's lawyers delivered a formal offer, which the BG board rejected.

The issue was price: BG and its advisers, Goldman Sachs and investment bank Robey Warshaw, acknowledged that BG's stock was at a historic low, but insisted the company had cleaned up its act and was facing a brighter future. It boasted some excellent operations in Brazil, where production was beginning to ramp up, and had a new, high-profile CEO.

For its part, Shell was worried about getting into protracted negotiations, said the person familiar with the talks. It feared a repetition of Pfizer's failed bid for UK rival AstraZeneca last year, when the US drugmaker kept raising its offer but was still rejected by the Astra board. "Shell did not want to play a bargain game," the person said.

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The negotiations involved some big London personalities. On the Shell board was Guy Elliott, who served as chief financial officer of miner Rio Tinto from 2002 to 2013, a time of frenzied dealmaking. And on the BG side sat CFO Simon Lowth, who previously held the same position at AstraZeneca for six years.

On March 25th, Mr van Beurden flew to Calgary with a new offer for Mr Gould. The following day, the two agreed Shell would pay £13.50 a share - representing a 50 per cent premium for BG. The deal would also have a stock component, giving BG investors exposure to any recovery in the oil price.

The two returned to Europe and soon after, BG's board approved the deal.

There was some debate about when to announce the deal. Some argued for delaying it until after the UK general election on May 7. Some inside Shell worried that if the group waited, the oil price could move and potentially upend the deal. Mr van Beurden decided to move quickly.

The initial market reaction from Shell investors was negative. The acquisition of BG is not expected to boost Shell's earnings per share until 2017. Some worried Shell was overpaying.

There were also fears that the oil major was making too big a bet on a recovery in the crude price. The deal assumes that the price for Brent crude will be back at $90 a barrel by 2018 from less than $60 today, a prediction that many in the industry disagree with. Shell's B shares fell 8 per cent on Wednesday, the day the deal was announced.

But Mr van Beurden brushed off the critics. It was, he said, an "incredibly exciting moment for Shell". But history will be the judge of whether this particular marriage has worked.

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