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Shell tipped to merge UK and Dutch parents

The Times: Shell tipped to merge UK and Dutch parents

“Shell is under intense pressure to streamline its complex board structure after the reserves misreporting scandal”

By Carl Mortished, International Business Editor

July 14, 2004

Posted 15 July 04

SPECULATION mounted last night that Shell is considering making radical changes to its corporate structure, including a possible merger of its Dutch and British holding companies.

The embattled oil group yesterday appointed a US investment bank, Citicorp, and a British merchant bank, NM Rothschild, to advise it on improvements to its structure and corporate governance.

Shell is under intense pressure to streamline its complex board structure after the reserves misreporting scandal in January. The company was then criticised for having a management structure that lacked accountability and had poor oversight by the nonexecutive directors of Shell Transport and Trading, the UK holding company, and the supervisory board of Royal Dutch Petroleum.

A steering committee of the two boards, chaired by Lord Kerr, is considering corporate reforms.

Lord Oxburgh, chairman of Shell Transport, said at the June annual general meeting that “radical” ideas were being considered.

Sources within Shell indicate that the mooted reforms include the takeover of Shell Transport by Royal Dutch, or the creation of a new holding company to acquire the Dutch and British parents.

A merger or takeover could have dramatic tax and legal consequences. Shell would need to ensure that such a corporate transaction did not entail huge tax liabilities or trigger change-of-control clauses in the group’s numerous joint ventures with third parties. Equally important for investors would be the possible loss of one of Shell’s primary share listings in London and Amsterdam, and its membership of investment indices, such as the FTSE 100.

The appointment by the steering committee of investment bank advisers suggests that Shell is seeking professional advice on investment issues. It may wish to use the banks as intermediaries in sounding out investors and stock market regulators.

Both banks have long relationships with Shell. Citicorp worked on its takeover of Enterprise Oil in the UK, and of Pennzoil, the US refining and lubricants company.

Some analysts, however, continue to doubt whether Shell will, in the end, take radical steps to upset the century-old Royal Dutch/Shell alliance. “I think this indicates that it has not been ruled out as an option but (such a move) would have big implications,” one analyst said.

(Posted by John Donovan)

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