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Lloyds List: Unified Shell group gives greater growth potential

Lloyds List: Unified Shell group gives greater growth potential

“Royal Dutch Shell is set to be reborn on July 20″

Wednesday 29 June 2005

Shareholders of Shell and Royal Dutch Petroleum approve joint structure, writes Martyn Wingrove

SHAREHOLDERS of Shell and Royal Dutch Petroleum approved plans to unify the corporate structure of the group, ending almost a century of duel ownership and creating a GBP120bn ($220bn) company.

Royal Dutch Shell is set to be reborn on July 20, when shares in the combined group will be issued on the London stock exchange, giving Shell a stronger position for organic growth and acquisitions.

Shell has been owned 60% by Royal Dutch, listed in Amsterdam, and 40% by Shell Transport ‘ Trading, since 1907, with an executive group board drawn from both companies.

The two boards will be combined and Shell will become the world’s third largest publically traded oil company after 99.75% of Shell T’T investors approved unification and 97.4% of Dutch shareholders backed the plan.

‘The corporate restructuring is vital for making our business more straightforward and more accountable,’ said Malcolm Brinded, Shell’s head of exploration and production at the shareholders meeting.

Under the approved arrangements Royal Dutch shareholders will receive A shares and Shell T’T investors will gain B shares, boosting the group’s position on the FTSE 100 index from 4% to almost 10%.

It is currently the sixth largest firm listed in London, but a market value of GBP120bn will push it into the top two, on a par with oil major BP.

Executives at Shell have hinted that the group could be in the hunt for acquisition targets using the strengthened shares as currency for deals, but analysts said Shell had plenty of time to buy companies to meet its growth targets.

Chief executive of the new group Jeroen van der Veer outlined the company’s long term strategy to boost output by 30% in 10 years by participating in 10 ‘elephant-sized’ projects involving oil and liquefied natural gas.

He wants current production of 3.5m barrels of oil equivalent increased to 5m barrels per day by 2015 investing more than $1bn in each of these 10 projects in this timeframe.

A unified Shell will have clearer reporting lines, leading to more transparency of its operations, and has pledged to be more responsive to shareholders.

Analysts expect more buying of Shell’s new shares after July 20 with fund managers lining up to purchase the stock in order to maintain their weightings in Shell.

Together with rival BP, the two oil companies’ weightings on the FTSE 100 index will become a formidable force of around 20%, leaving the top London shares index more open to oil price volatility, said analysts.

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