Amid mounting concerns over the viability of its $60 billion takeover of BG Group, Royal Dutch Shell said Monday it plans to cut about 3% of the combined company’s workforce once the deal is completed early next year.
Shell was expected to trim the workforce if the takeover went through as planned, but the scale of the cuts wasn’t yet known. In a news release Monday, it said 2,800 jobs would be lost in addition to the elimination of 7,500 positions at Shell that was previously announced.
“Shell’s expectation is that BG’s business would be integrated into Shell’s businesses,” the company said. “As part of that, Shell proposes that office consolidation will be undertaken where practical in certain locations around the world.”
As the Wall Street Journal reports, the cuts were announced on the same day that Shell and BG said Chinese regulators had given “unconditional” approval for the merger, “the final major antitrust hurdle the companies said they faced.” Regulators in Brazil, the European Union , the U.S. and Australia had previously approved the deal.
“I am delighted we now have all the pre-conditional approvals needed to move to the next important phase,” Shell’s CEO Ben van Beurden said. “This is a strategic deal that will make Shell a more profitable and resilient company in a world where oil and gas prices could remain lower for some time.”
But according to the Guardian, some Shell shareholders have “become increasingly doubtful about the BG deal, which was agreed on the assumption oil prices would recover to $90 a barrel by 2020.” The price of oil has slumped from $115 a barrel in summer 2014 to less than $40, with some analysts predicting it could fall further.
“The deal doesn’t make financial sense at the current oil price,” said David Cumming, head of equities at Standard Life Investments. “You have to be pretty bullish on the oil price to make this deal work.”
Shell doubled its estimate for cost cuts to $2 billion last month as it sought to reassure investors that the BG takeover remained a good deal.