Shell Plans Shift to Britain, and Dropping ‘Royal Dutch’
The restructuring is meant to make the company more appealing to investors and make it easier to sell assets, the oil giant said.,
Shell proposes a shift to Britain, dropping ‘Royal Dutch’ from its name.
A Shell refinery outside Rotterdam, the Netherlands. The company is proposing to move its headquarters to London from The Hague.Credit…Robin Utrecht/Anp/Agence France-Presse, via Getty Images
By Stanley Reed
Nov. 15, 2021
Shell, Europe’s largest energy company, said Monday that it was proposing to move its headquarters to Britain from the Netherlands and make major changes in its share ownership and tax status, including dropping “Royal Dutch” from its name.
The moves are intended to make the company, whose share price has lagged rivals, more appealing to investors, and they come less than a month after an activist investor, Daniel Loeb, suggested changes to the company’s structure.
The changes would allow Shell to offer bigger share buybacks, pushing up stock prices for more shareholders. They would also let Shell buy and sell more businesses, and avoid a Dutch withholding tax on certain shares.
In the Netherlands, where Shell is the largest public company, the government said it “very much regrets” the announcement.
The British government, which has struggled to demonstrate that its separation from the European Union can provide a boost to business, welcomed the shift. The country’s business minister, Kwasi Kwarteng, called it “a clear vote of confidence in the British economy.”
Among the changes announced by the company, top management including the chief executive, Ben van Beurden, would move to Britain, and the headquarters would be in London. The company’s current dual British and Dutch share structure would be melded into a single class of shares.
The changes will come up for approval at a general meeting of shareholders scheduled for Dec. 10.
The company said it would drop “Royal Dutch” from its name, noting that “the company anticipates it will no longer meet the conditions for using the designation.”
“The cabinet very much regrets that Shell wants to move its headquarters to the United Kingdom,” Stef Blok, the Dutch minister for economy and environment, said in a statement. He added that the government was “in conversation” with Shell’s top management about the consequences for jobs and investment decisions.
The proposed changes appear to be an effort by management to enhance the appeal of the company’s shares as Shell, now based in The Hague, tries to navigate the difficult transition to cleaner energy from fossil fuels. Jessica Uhl, Shell’s chief financial officer, said recently that the company had not done well at explaining its strategy to investors.
Such shortcomings were highlighted in a letter that Mr. Loeb, the chief executive of Third Point, a New York-based fund management firm, wrote to investors in October. Mr. Loeb said Shell lagged rivals like Exxon Mobil and Chevron in share price performance despite having a “higher-quality and more sustainable business mix” and called for a breakup of the firm into renewable energy and legacy oil units.
Third Point has taken a stake in Shell worth about $750 million, according to a person familiar with the matter.
Shell appears to be trying to address such concerns. In a news release on Monday, Shell said a single share structure would be “simpler for investors to understand and value.” And in a letter to shareholders, Shell’s board said the new legal structure would make it easier to sell assets and even to break up the company, although it said such a move was not “under active consideration.”
The new setup would remove a limitation that Shell has faced when it offers share buybacks.
Under arrangements dating to 2005, Shell has class A shares, which are subject to a Dutch withholding tax on dividends, and B shares, which are not. Dividends to the two classes of shareholders are paid from profits generated by separate business groups. In practical terms, this situation means that the company can buy back only class B shares, limiting the size of the pool, while management must be careful not to sell assets that might constrain funding for the B share dividends.
The company said the new arrangement would allow it to accelerate share buybacks by creating a larger pool of shares available for them.
Many analysts welcomed the proposals, although the move could result in the company’s owing taxes of up to $400 million to the Netherlands, Shell estimates.
“It removes a disadvantage” Shell has faced versus rival companies, Oswald Clint, an analyst at Bernstein, a market research firm, wrote in a note to clients on Monday. Shell’s share price rose 2.5 percent in trading on Monday.
Although Shell said in its news release that it would “continue to be a significant employer with a major presence in the Netherlands,” the company’s management has been frustrated with the Dutch authorities in recent years, including over taxes. The government has been gradually shutting down the huge Groningen natural gas field, operated by a joint venture between Shell and Exxon Mobil, in the northern Netherlands because of earthquakes, and a Dutch court this year ordered Shell to sharply reduce its worldwide emissions.
Shell is moving to meet some parts of the court ruling, but the company is appealing. A move away from the Netherlands “would make it harder to claim that the Dutch court has jurisdiction,” analysts at Jefferies, an investment bank, wrote in a note to clients on Monday.
But Shell’s board said the proposals would have “no impact on legal proceedings” related to the court decision.
Peer de Rijk, a campaigner for Friends of the Earth Netherlands, which led the court case, said the corporate shift would not affect the court’s ruling. “The verdict clearly states that they have to start moving, and this is still the case,” he added.
Shell’s move back to London is another twist in a long Anglo-Dutch saga. Founded in London in the 19th century by Marcus Samuel, a trader whose father sold boxes decorated with seashells, Shell was largely taken over in the early 20th century by another rising oil company, Royal Dutch, whose roots were in Asia.
The British and Dutch operations, known as Shell Transport and Trading and Royal Dutch Petroleum, operated more like a partnership until 2005, when they merged under the Royal Dutch Shell banner with headquarters in The Hague. Now the pendulum appears to be swinging back again toward Britain.
Claire Moses contributed reporting.