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Shake-up at Shell: what shareholders need to know

Daily Telegraph: Shake-up at Shell: what shareholders need to know

By Christopher Hope, Business Correspondent (Filed: 04/06/2005)

Shell, the Anglo-Dutch oil and gas giant, is only just emerging from its annus horribilis of 2004 when it revealed it had over-estimated its proven oil and gas by over a quarter.

The shock waves are still being felt, with Shell admitting it will be a few years before it finds more oil and gas than it pulls out of the ground.

The problems have forced the company to sort out its quirky dual structure, and complete the merger of Shell’s two controlling companies which has remained unfinished since the beginning of the last century.

Who owns Shell now?

Shell is owned by the shareholders of two separate companies: Shell Transport & Trading (STT) in the UK and Royal Dutch Petroleum (RDP) in the Netherlands.

STT shares are traded on the London Stock Exchange, while RDP shares are traded on the Euronext exchange in Amsterdam. STT investors hold 40 per cent of Shell, while RDP shareholders have 60 per cent.

Shell is run by a committee of managing directors, which has a chairman. There are two other chairmen of STT and RDP, who serve in a non-executive capacity.

What’s going to happen?

Shell wants to create one company called Royal Dutch Shell, with just one set of shareholders, one conventional board and one chief executive.

Royal Dutch Shell will be headquartered in the Netherlands and have its main listing on the London Stock Exchange. The shares will be split into two classes: STT holders will receive “B” shares and RDP holders will receive “A” shares.

What does it mean for STT investors?

Very little. Shareholders in STT will exchange their shares for the equivalent value of B shares in the new company. This will mean that a holder of one STT share will receive 0.287333066 Royal Dutch B shares. Holders of RDP shares will receive two A shares for each RDP share.

Are STT shareholders losing out?


How can I calculate the new share price of Royal Dutch Shell?

Divide the share price of STT by 0.287333066, eg 480p becomes £16.70.

What do STT shareholders have to do?

STT investors have to vote at two meetings, called the court meeting and the extraordinary general meeting, following the annual general meeting at the ExCel Centre in London’s Docklands on June 28.

They can also vote by proxy. Forms will be sent out; blue for the court meeting and pink for the EGM. Shell needs holders of 75 per cent of the issued share capital to approve the plans.

What do RDP shareholders have to do?

RDP shareholders have to vote at an annual general meeting, also on June 28, in the Hague, where Shell needs a simple majority.

Shareholders must then return their share application forms by July 18. Shell needs holders of 95 per cent of the issued share capital to return their forms, accepting the offer. However, this high approval level can be waived by the boards of STT and RDP if it is not achieved.

Are the B shares more valuable than the A shares?

Probably. The RDP shares are worth between 3 per cent and 5 per cent less than STT shares because RDP stock is liable for Dutch withholding tax. Shell has pledged to focus on buying back A shares in preference to B shares in its ongoing buy-back plan. The company is hoping to spend between $3billion and $5billion on buy-backs this year.

Are there any tax implications for UK holders of STT shares?

No. The dividends are sourced in the UK and taxed as though they were paid by a British company.

Are there any tax implications for British holders of RDP shares?

Yes. They could be liable for capital gains tax. Of course, holders are only liable if making a gain in excess of the annual allowance – £8,500 this year – on the value of the shares. Depending on how long the shares have been held, taper relief may reduce your tax liability. Before taking action, it would be prudent to consult an accountant or independent financial adviser.

How many Britons hold RDP shares?

Shell says it has no idea. The number is likely to be small. Typically, British residents will hold RDP shares in the form of bearer certificates.

When will the final price of RDP and STT shares be struck?

The figure will be calculated using the closing price on July 19.

When will Royal Dutch Shell shares start trading?

July 20.

What happens next?

STT investors will receive their statements of entitlement for their B shares 14 days after trading starts. RDP shareholders should receive their A share certificates by July 25.

Will UK shareholders in Shell be able to attend annual meetings in future without travelling to the Hague?

Shell says the AGM next year will be held simultaneously in London and the Hague. British shareholders will be able to question the board by videolink from London.

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