Invesco Canada blog

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Norman MacDonald | April 10, 2015

The market missed what Shell – and Trimark – saw

Royal Dutch Shell PLC has offered to buy BG Group PLC for roughly US$70 billion, an offer that represents a 50% premium to the previous day’s closing price. Prior to the premium, the weight of BG Group in Trimark Resources Fund was approximately 3% and in Trimark Energy Class it was approximately 2%, so this is a significant win for both funds considering the premium being offered to date.

BG Group is a London-listed global energy company with a unique set of assets that the market had a tough time valuing. The assets ranged from Egyptian liquefied natural gas volumes to offshore Brazilian oil and everything in between. This, coupled with a new CEO taking over last year, caused the market to doubt the company’s long-term strategy. I have always been intrigued by BG’s set of assets and it is nice to see our extensive research on the company has finally paid off.

In the resources space, sometimes the market gets it wrong when setting day-to-day business values because of short-term commodity volatility. As I mentioned in this week’s Globe and Mail article, I will continue to use market volatility to my advantage. Shell saw more value in BG Group than the market was willing to apply to the company.

Advisors have been asking about active management lately as markets have been volatile. To me, this is a perfect example of how our active management style works out there in the marketplace. In the case of BG, I travelled annually to London to meet the management team and go through the company’s net asset value. I did this with a fine-tooth comb, asking questions and really digging into the details.

If you have questions about the Funds or about how this acquisition will impact them, please leave your comment and I will post an answer.

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