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Struggling energy producer BG Group is recommending to shareholders a takeover offer worth £47bn from Royal Dutch Shell.
Details of the mega merger - the biggest in the industry for a decade - were released in a statement to the London Stock Exchange just hours after BG Group had confirmed "advanced discussions."
If the deal was to proceed it would create a company with a combined value of £224bn - overtaking HSBC to become the biggest on the FTSE 100.
In the joint statement, the two firms said that as part of the recommended deal Shell would pay 383p in cash and 0.4454 Shell B shares for each BG share.
It said this represented a premium of around 52% to the 90 trading day average and would result in BG shareholders owning around 19% of the combined group.
The move is widely seen as a response to the collapse in raw energy prices, which resulted in oil costs falling by as much as 60% last year from their June peak.
Energy companies have been slashing costs and investment plans in response.
BG Group, a natural gas producer, was created in 1997 when British Gas demerged into two separately-listed companies, with Centrica having responsibility for the retail side of the business.
It has endured several problems in addition to weak prices including big cost over-runs on a huge gas project in Australia and major writedowns in its American and Egyptian businesses.
Its new chief executive Helge Lund only started work in February and has since been embroiled in a row over his pay package.
The proposed combination will add some 25% to Shell's proved oil and gas reserves and 20% to production and it would make the company the second largest oil major behind Exxon Mobil.
Mr Lund said the deal "delivers attractive returns to shareholders and has strong strategic logic.
"BG's deep water positions and strengths in exploration... will combine well with Shell's scale, development expertise and financial strength."