The Guardian (UK): Good and bad news in shares switch

The Guardian (UK): Good and bad news in shares switch

“From July 20, the new Royal Dutch Shell plc will start to trade…”

Terry Macalister

Wednesday June 29, 2005

The massive shake-up agreed by Shell yesterday will bring significant changes for individual shareholders, not least the possibility of a further rise in the value of their stakes.

Yesterday Shell Transport & Trading stock – the outgoing UK arm – rose 3% to 545p, which is its highest level since October 2001.

City analysts believe there are good reasons to suppose the shares will rise further as fund managers find themselves underweight in what will be a major new presence.

Only Shell Transport & Trading is listed in London now but, put together fully with Royal Dutch, the combined entity will vie with BP for the title of Britain’s biggest firm, with a market capitalisation of £125bn.

From July 20, the new Royal Dutch Shell plc will start to trade, although to appease Dutch national sensibilities, it will still have two different types of shares: “A” for Royal Dutch and “B” for Shell Transport.

Analysts at investment bank Merrill Lynch estimate Shell’s FTSE All Share weighting will rise from 3.2% to 7.5% while its position in the FTSE 100 index will go up from 3.9% to 9%.

Fund managers have been aware of the change for months and most have increased their holdings slightly, but probably not enough. This has already led to a 22% rise in Shell share values since the unification of the company was announced in October.

“Analysis has shown that in previous examples of indexation changes it has taken between nine and 24 months for the full rebalancing of portfolios,” says Merrill.

But while this should drive Shell shares up further, not everybody is pleased. About 3,000 British holders of Royal Dutch shares are facing potential 40% future capital gains hits with a combined value of nearly £80m, according to some estimates.

This is because under UK rules, the switch to A shares is regarded as a disposal, not a simple transfer.

Shell UK chairman Lord Oxburgh said the company sympathised with shareholders but it could only give advice.

However, one investor, Peter Hatfield, said: “We don’t want advice and help but cash.”

The company might be British-registered but it will hold its annual meetings in Holland, with only a video link to the UK.

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