A Royal Dutch Shell announced this Monday (15) that it will abandon its dual-stock structure and move its headquarters from the Netherlands to the United Kingdom, sidelined by Dutch taxes and facing climate-related pressure in court as the energy giant tries to move away from oil and natural gas.
The company, which for a long time faced investor doubts about its dual structure and was recently hit by a court order dutch on its climate goals, it intends to remove the “Royal Dutch” from its name – part of its identity since 1907 – to become Shell Plc. Dutch, in English, means Dutch.
The Anglo-Dutch company is in a long-running dispute with Dutch authorities over the country’s 15% tax on dividends, which Shell sought to avoid paying with its two classes of shares. Its new, unique structure would solve this problem and allow Shell to close sales or acquisition deals more quickly.
In yet another blow to its relations with the Netherlands, the ABP, the Netherlands’ largest state pension fund, said last month it would remove Shell and all fossil-fuel-related companies from its portfolio.
The Dutch government said on Monday it was “unpleasantly surprised” by Shell’s plans to move from The Hague to London.
The decision, however, will be seen as a vote of confidence in London after the UK exit from the European Union triggered a multi-billion-euro shift in daily trading of shares out of the UK capital to Amsterdam.
Shell shares, which are yet to be traded in Amsterdam and New York, rose more than 2% in London on Monday morning after the news.
“The current complex ownership structure is subject to restrictions and may not be sustainable in the long term,” Shell said in announcing its plan to change the structure. The change requires at least 75% of shareholder votes at a general meeting to be held on Dec. 10, the company said.
“We see merit in the proposal to restructure Shell’s share structure and tax residency. Among other benefits, the proposed changes will increase Shell’s ability to repurchase shares,” Jefferies said in a research note.
Shell said it would return $7 billion from the sale of assets in the USA for ConocoPhillips, in addition to an ongoing share buyback program.
Monday’s move follows a major overhaul that Shell completed this summer in the Northern Hemisphere as part of its strategy to shift from oil and gas to renewable energyand low-carbon energy. The movement included thousands of job cuts around the world.
In May, a Dutch court ordered Shell to deepen its planned cuts in greenhouse gas emissions in order to align with the Paris Agreement, which aims to limit global warming to 1.5ºC. Shell said it will appeal the decision.
“If this decision allows the company to be more agile in making its transition to zero net emissions, then it should be viewed positively,” said Adam Matthews, chief investment officer responsible for the Church of England Pensions Board, a shareholder of Shell.
Matthews, who is leading talks with Shell on behalf of the Climate Action 100+ investor group, said the group should not take away the company’s responsibility for implementing the Dutch court’s decision.
Shell is also fighting calls last month by activist investor Third Point for the company to be split into multiple companies. Shell’s top executives responded, saying the company’s businesses worked better together.
Corporate giants are under increasing pressure to simplify their structures, with General Electric, Toshiba and Johnson & Johnson announcing plans last week to split into separate companies.
Dual listings, which are more expensive to maintain, are also falling out of favor.
The Consumer Products Giant Unilever abandoned its dual Anglo-Dutch structure last year in favor of a single London-based entity. Mining company BHP Group also ended this structure.
Reference: CNN Brasil
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