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BG to split gas arms
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March 22, 2000: 5:28 a.m. ET
U.K. gas firm separates domestic, overseas units; plans telecom expansion
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LONDON (CNNfn) - BG Group, a U.K. gas producer and distributor, announced plans Wednesday to split its domestic business from its overseas exploration and supply activities, sparking a sharp jump in its share price.
BG is separating it Transco domestic pipeline unit from its fast-growing overseas arm, BG International, in a long-awaited move that follows the demerger of Centrica, its gas retailing business, in 1997
The new BG Group will comprise the international operations while Transco will be spun off with a separate stock-market listing.
BG Group (BG) shares jumped 12 percent to 340 pence in mid-morning trade, valuing the company at £11.9 billion ($18.8 billion). Each of the two parts of the company represents a half of that value.
Transco also plans to follow the trend of other U.K. energy firms by starting a telecommunication business. It also said it may seek to acquire one of Britain's deregulated water companies.
 The company said it expects to complete the split by the end of the year, subject to shareholder and regulatory approval.
Analysts were quick to note that the international unit, which operates in 19 countries, could quickly become a bid target when it is listed separately from the pipeline unit.
"Shell (SHEL) certainly would have a very big look at them [along with] ENI of Italy and Repsol-YPF," UBS Warburg analyst Simon Hawkins told Reuters. "They have some assets in Egypt and South America that would fit very nicely for any of those."
The demerger is seen as a means of unlocking hidden value in the stock by allowing each arm to grow separately and concentrate on its main markets. Analysts said the existing combination of two very different businesses has hampered BG's stock price, which has lost 15 percent since the start of the year.
BG International president Frank Chapman will become chief executive of the new BG Group, whose current head, David Varney, will leave the company once the demerger is completed. Transco chief executive Phil Nolan will stay in that post at the pipeline arm. 
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BG Group
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