Investec upgrades BG Group to 'hold' after Shell offer

LONDON (ShareCast) - Investec (LSE: INVP.L - news) has raised its rating for natural gas outfit BG Group (LSE: BG.L - news) from 'sell' to 'hold' following last week's surprise £47bn takeover bid by Shell (LSE: RDSB.L - news) . The broker said that despite the market's concerns - shown by the stock still trading at a 10% discount to the 1,350p-per-share offer price - the deal is unlikely to be rejected by shareholders.

However, given that Shell's offer represents a 50% premium to the closing price the day before the deal, "we do not anticipate a counter-offer", Investec said.

The broker, which hiked its target price for BG from 800p to 1,230p, said the company is regarded as having a good asset base but without the financial/technical "clout" to develop resources in an optimal manner.

It suspected BG chairman Andrew Gould believed the company "was better off in the hands of a rival with deeper pockets".

Investec said: "We regard BG as a company with a decent asset base. However, we did not believe that its longer-term growth options (beyond Brazil and Australia) justified its 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, and we upgrade to 'hold'." The stock was up 0.3% at 1,171.5p by 10:39.