Royal Dutch Shell today announced acquisition of smaller British rival BG Group Plc for about USD 70 billion to create the world's largest independent producer of LNG.

Shell will pay a 50 per cent premium to BG's closing share price on Tuesday of 910.4 pence, with an offer consisting of 383 pence in cash and 0.4454 of Shell's B shares for each BG share, the companies said today.

Commenting on today’s announcement, Jorma Ollila, Chairman of Shell said:  "This is an important transaction for Shell, accelerating the delivery of our strategy for shareholders. The result will be a more competitive, stronger company for both sets of shareholders in today’s volatile oil price world.

BG shareholders will receive significant value through the premium being offered for their shares. They will become shareholders in Shell, accessing an attractive dividend policy, a share in the significant synergies and the compelling upside and enhanced operating capability of the combined group.

We believe that the combination is in the interests of both our companies and their shareholders."

The Combination will result in BG Shareholders owning approximately 19% of the Combined Group. Shell expects the Combination to accelerate its growth strategy in global LNG and deep water. The Combination will add some 25% to Shell’s proved oil and gas reserves2 and 20% to production, each on a 2014 basis, and provide Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.The Combination has the potential to unlock further value for both sets of shareholders from the combined portfolio. An enhanced set of upstream positions will be a springboard to high-grade the Combined Group’s longer term portfolio, increase asset sales and reduce capital investment, thereby enhancing the Combined Group’s capacity to pay dividends and undertake share buybacks.

Shell expects the Combination to generate pre-tax synergies of approximately $2.5 billion per annum (which have been reported on) and has also identified further significant opportunities. In the near term, BG Shareholders will benefit from the dividends enjoyed by Shell Shareholders3. Shell today confirms its intention to pay dividends of $1.88 per ordinary share in 2015 and at least that amount in 2016. In the medium term, all shareholders will benefit from the potential for enhanced cash flow and a continued drive to grow returns and enhance capital efficiency from the combined portfolio.

Based on Shell’s proved oil and gas reserves calculated on an SEC basis for the financial year ended 31 December 2014 of 13,081 mboe and BG’s proved oil and gas reserves calculated on a PRMS basis for the same period of 3,612 mboe. Please see paragraph 15 of Appendix 3 for further information. BG Shareholders will be entitled to receive each Shell dividend for which the record date falls after completion of the Combination.

Commenting on the Combination, Andrew Gould, Chairman of BG said: "This offer represents an attractive return for BG shareholders. BG has a strong portfolio of operations including growth assets in Australia and Brazil and a highly competitive LNG business, as well as an enviable track record of exploration success. The BG Board remains confident in BG’s long-term prospects under the leadership of Helge Lund. Shell’s offer, however, allows us to accelerate and de-risk the delivery of this value. The structure of the offer will provide BG shareholders with an attractive premium and a substantial cash return as well as enabling them, if they wish, to participate in the benefits of the combination through the share component. For these reasons, the BG Board recommends the offer."

The Scheme is expected to become effective in early 2016, subject to the satisfaction or waiver of the Pre-Conditions set out.