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Royal Dutch/Shell merger declared unconditional

Reuters: UPDATE 2-Royal Dutch/Shell merger declared unconditional: “The merger is aimed at restoring confidence in Shell, after a damaging reserves-overbooking scandal last year…”

Tuesday 19 July 2005

By Karl Hanuska and Tom Bergin

AMSTERDAM/LONDON, July 19 (Reuters) – Royal Dutch/Shell Group (RD.AS: Quote, Profile, Research)(SHEL.L: Quote, Profile, Research) has cleared the final hurdle in the planned merger of its Dutch and UK holding companies, after Royal Dutch shareholders pledged their shares to the deal.

The world’s third-largest oil group by market capitalisation said on Tuesday that 91.69 percent of shares in Royal Dutch, which owns 60 percent of the dual-headed group, had been tendered for exchange into shares in the unified firm.

The merger is aimed at restoring confidence in Shell, after a damaging reserves-overbooking scandal last year which was partly blamed on the group’s complicated management and ownership structure.

Following the tender result, the group declared the plan to merge Royal Dutch with its UK counterpart, the Shell Transport and Trading company, unconditional, subject to court approval and registration, which are seen as technicalities.

Trading in the new firm, Royal Dutch Shell Plc, is expected to start on Wednesday July 20.

“Shareholders have shown strong support throughout the process and voted overwhelmingly in support of the proposals at the recent shareholder meetings to move to one company,” Chief Executive Jeroen van der Veer said in a statement.

NO SQUEEZE-OUT, YET

The 91.69 acceptance level was below the 95 percent required by Dutch law to squeeze out minority shareholders and originally set by Shell for approval of the deal.

Shell spokesman Andy Corrigan said the acceptance level was in line with previous Dutch tender offers.

“The shortfall is due to the fact of shareholder inaction rather than any lack of support,” Corrigan said.

However, many non-Dutch private shareholders in Royal Dutch opposed the deal because its structure exposed them to large capital gains tax bills.

Shell reduced its own requirement for 95 percent approval earlier this month, when it said the unification could go ahead if only 75 percent of shares in Royal Dutch were tendered.

Shell announced another offer scheme for Royal Dutch shares which it hopes will lead to 95 percent acceptance and allow a squeeze out. The scheme will run until Aug. 9.

Under the terms of the merger plan, Royal Dutch shareholders will receive two Class A shares in the unified Royal Dutch Shell Plc for each Royal Dutch share.

Shell hopes the unification will help to streamline its century-old management structure.

Executives of the operating group are currently drawn from the boards of each holding company. The unified company will have clearer reporting lines and has pledged to be more responsive to shareholders.

Royal Dutch Shell will have its primary listing in London but its headquarters in The Hague. When it starts to trade it will have a market capitalisation of about $200 billion.

Analysts have said that the existence of a single Shell share could also help the group play a bigger role in oil-industry consolidation.

Shell Chief Financial Officer Peter Voser told a German newspaper in June that the restructuring would allow Shell to use its shares as a currency for acquisitions.

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