Shell proposes simplification of its share structure
Published by Bella Weetch,
The board of directors of Royal Dutch Shell plc (Shell) has announced a proposal to simplify the company’s share structure to increase the speed and flexibility of capital and portfolio actions. The simplification is designed to strengthen the company’s competitiveness and accelerate both shareholder distributions and the delivery of its strategy to become a net-zero emissions business.
Shell’s Chair, Sir Andrew Mackenzie, said: “At a time of unprecedented change for the industry, it is even more important that we have an increased ability to accelerate the transition to a lower-carbon global energy system. A simpler structure will enable Shell to speed up the delivery of its Powering Progress strategy, while creating value for our shareholders, customers and wider society.”
Under the announced proposal, Shell intends to change its share structure to establish a single line of shares, which is simpler for investors to understand and value. The company will also align its tax residence with its country of incorporation in the UK.
Shell has been incorporated in the UK with Dutch tax residence and a dual share structure since the 2005 unification of Koninklijke Nederlandsche Petroleum Maatschappij and The Shell Transport and Trading Company under a single parent company. It was not envisaged at the time of unification that the current A/B share structure would be permanent.
A conventional single share structure will allow Shell to compete more effectively. It will:
- Allow for an acceleration in distributions by way of share buybacks, as there will be a larger single pool of ordinary shares that can be bought back. Following the start of a US$2 billion buyback programme in July 2021, Shell announced in September 2021 that it will return an additional US$7 billion to shareholders following completion of the sale of its Permian assets in the US.
- Strengthen Shell’s ability to rise to the challenges posed by the energy transition, by managing its portfolio with greater agility.
- Reduce risk for shareholders by simplifying and normalising Shell’s share structure in line with its competitors and most other global companies. The current complex share structure is subject to constraints and may not be sustainable in the long-term.
Following the simplification, shareholders will continue to hold the same legal, ownership, voting and capital distribution rights in Shell. Shares will continue to be listed in Amsterdam, the Netherlands; London, England; and New York, US (through the American Depository Shares programme), with FTSE UK index inclusion. It is fully expected AEX index inclusion will be maintained. Shell’s corporate governance structure will remain unchanged.
Shell is proud of its Anglo-Dutch heritage and will continue to be a significant employer with a major presence in the Netherlands. Its Projects and Technology division, global Upstream and Integrated Gas businesses and renewable energies hub remain located in The Hague, the Netherlands.
Shell’s growing presence in wind projects off the Dutch coast; recent decision to build a world-scale, low-carbon biofuels plant at the Energy and Chemicals Park Rotterdam, in the Netherlands; plan to build Europe’s biggest electrolyser in Rotterdam; and its intention to participate in the Porthos carbon capture and storage (CCS) project, all underline the importance of the Netherlands in the company’s energy transition activities.
Carrying the Royal designation has been a source of immense pride and honour for Shell for more than 130 years. However, the company anticipates it will no longer meet the conditions for using the designation following the proposed change. Therefore, subject to shareholder approval of the resolution, the board of directors expects to change the company’s name from Royal Dutch Shell plc to Shell plc.
Sir Andrew Mackenzie said: “The simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive. As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition. Shell’s Board unanimously recommends shareholders vote in favour of the proposed resolution.”
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/16112021/shell-proposes-simplification-of-its-share-structure/
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