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Investors back Shell strategy after Wall Street raider’s swoop

The Telegraph

Investors back Shell strategy after Wall Street raider’s swoop

Most shareholders unhappy with owning a fossil fuel company have already sold their holdings, says one institutional investor

Corporate raider Dan Loeb’s plot to break up Shell risks harming its efforts to tackle climate change, top investors have warned, in a sign he may face a struggle to win over the City.

The pugnacious Third Point founder, 59, has argued the FTSE 100 company should split its oil and renewable assets into separate businesses to both drive better returns and greater investment, and stop trying to be “all things to all people”.

Third Point’s $750m (£543m) stake in the $187bn company, revealed this week, amounts to a slim 0.25pc, but analysts warned of a repeat of activist changes in June at US oil major Exxon caused by activist Engine No.1, despite an even smaller stake.

Top shareholders greeted Loeb cautiously, however, warning the integrated business would be difficult to separate and that Shell’s shift towards cleaner energy rests on several cogs working together, as well as cash from oil being re-invested in renewables.

Shell is one of the world’s largest oil, gas and chemicals companies, pumping out more than 887m barrels of oil equivalent in 2020.

Its 87,000 employees work in more than 70 countries, aiding its growth in wind power, hydrogen and carbon capture. It also has more than 40,000 forecourts and a small UK household energy supplier.

One large institutional investor with a stake in Shell of a similar size to Third Point’s, said he could see what the activist was trying to do but added: “I’ve got a number of issues with it … I think that peeling apart the two businesses would not be easy.

“While the businesses are together, the existing oil and gas business provides cash flow to help feed the new renewables business.

“People talk about energy transition, not energy step change. You need the time and cash flow to affect the transition.

“Maybe what they are thinking is that you can put a big fancy multiple on the renewables business. That doesn’t help the business. That doesn’t help the end goals of decarbonising the energy system.”

The investor added shareholders unhappy with owning a fossil fuel company such as Shell, in an era characterised by its push against climate change, had already sold out. “I don’t feel there is any underlying disquiet” among those who remain, he added.

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