Shell abandons the “Dutch” name and makes Great Britain its headquarters

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(Bloomberg) – Royal Dutch Shell Plc has announced a major overhaul of its legal and tax structure that will see the company move away from the Netherlands due to deteriorating relations with what has been its home country for a century.

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The changes come as Shell is battling activist investor Dan Loeb, who is asking the company to split in two to attract shareholders who leave the energy sector due to concerns about climate change.

Shell said on Monday that it plans to do away with its current dual-stake structure, remove “Royal Dutch” from the name, move its UK tax residence and relocate its senior management from The Hague to London. The Dutch government immediately said it was “unpleasantly surprised” by the announcement.

The adoption of a simplified structure has been in the pipeline for years, but Shell’s relations in its home country have become increasingly strained in recent times. Dutch pension fund ABP said last month that it would eliminate the oil major – and all fossil fuels – from its portfolio without warning, while in May a court in The Hague ruled that the company must cut emissions harder and harder. faster than expected.

“Simplification will normalize our shareholding structure under a single country’s tax and legal jurisdictions and make us more competitive,” said President Andrew Mackenzie in a statement. “Shell will be in a better position to seize opportunities and play a leading role in the energy transition.”

The company was incorporated in the UK with Dutch tax residency and a dual share listing since the 2005 unification of Koninklijke Nederlandsche Petroleum Maatschappij and Shell Transport & Trading Co. At the time it was not expected that the shareholding structure would be permanent, the company She said.

Shell also said it will likely no longer meet the conditions for using “Royal” in its title – a part of its name since 1907 – and expects to become Shell Plc, subject to shareholder approval.

UK boost

UK affairs secretary Kwasi Kwarteng welcomed the news, saying it was a “clear vote of confidence in the British economy” and that it “will attract investment and create jobs”. Shell said around 10 executives, including CEO Ben van Beurden and CFO Jessica Uhl, will move to the UK.

“Shell informed the government of this intention yesterday,” said Dutch Minister for Economic Affairs and Climate Policy Stef Blok. “We are unpleasantly surprised by this news. The government deeply regrets that Shell wants to relocate its headquarters to the UK. “

Although the Netherlands is notoriously pro-business, Prime Minister Mark Rutte has had to act on the growing belief that businesses aren’t giving back enough. He had to backtrack on a 2017 plan to eliminate a dividend tax, questioning the structure of Shell’s headquarters. Consumer goods manufacturer Unilever Plc also finished its dual structure in 2020 and registered as a fully British company.

Like its European colleagues, Shell has embarked on a decades-long strategy to contain its emissions, in part by selling more low-carbon fuels. But his approach to the energy transition is struggling to catch on. Ahead of its earnings report last month, activist investor Loeb revealed that his fund Third Point LLC had acquired a $ 750 million stake in Shell and was pushing to dissolve the company.

Third Point’s position came to light just days after Shell’s longtime ally ABP said it would divest 15 billion euros ($ 17.2 billion) of fossil fuel assets by early 2023. , including its stake in the energy giant.

Legal appeal

Investor pressure adds to the legal challenges. Shell is challenging the May court verdict that the company must reduce its emissions by 45% by 2030.

“The simplification will have no impact on the legal proceedings related to the Dutch court ruling,” Mackenzie said, adding that the company has already expanded its carbon reduction goals.

QuickTake Explainer: What does a Dutch court ruling mean for Shell and Big Oil?

According to Sanford analyst C. Bernstein Oswald Clint, the change in share classes removes a disadvantage that Shell had over its counterparts. It will put an end to the mismatch of two different tax and fiscal authorities, removing “the friction and withholding issues related to buybacks, allowing them to materially increase,” he said.

After cutting its dividend at the height of the pandemic last year, Shell has spent the past 1.5 years trying to repair relations with shareholders. The company reintroduced the buybacks in July and promised to return investors an additional $ 7 billion in proceeds from the sale of its US assets in the Permian.

Shell is currently limited to approximately $ 2.5 billion in share repurchases per quarter, a figure that could double with the new structure, according to RBC Europe Ltd. analyst Biraj Borkhataria. “For us, this suggests Shell’s intention to give back more of this to shareholders over the next few years,” he said.

Investors will be asked to vote on a specific resolution on the simplification plans. A general assembly is scheduled for next December in Rotterdam. 10.

(Updates with UK Trade Secretary’s comment in the eighth paragraph.)

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