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Shell shares rise as FTSE 100 energy giant moves corporate HQ to London

·5-min read
 (Stuart Conway / Shell)
(Stuart Conway / Shell)

ROYAL DUTCH Shell will lose its regal title under proposals to tilt the FTSE 100 oil giant’s centre of gravity from the Netherlands to London.

 (Ben Stansall/AFP/Getty Images)
(Ben Stansall/AFP/Getty Images)

CEO Ben van Beurden (right), CFO Jessica Uhl and seven other senior executives will relocate to the capital full-time in what the £130 billion super-major called a “simplification” of its structure.

Shell’s confusing dual-class shares will be merged into a single line to free up more liquidity as it presses ahead with a $7 billion buyback.

Its corporate HQ and tax residence will shift to the UK where all board and high-level meetings will be held.

Analysts suggest the move will lead to a one-off demand for exit tax of up to £400 million from Dutch authorities.

The firm will still be listed in Amsterdam, London and New York but will no longer meet the criteria to use the “Royal Dutch” designation.

That ends the royal association which the company said had been a source of “immense pride” for 130 years.

The clearer separation from the Netherlands may also ease pressure from a legal ruling at The Hague ordering Shell to cut its carbon footprint more quickly and slash Scope 3 emissions, released when fuel is burned by customers, by 45% by 2030.

Dutch “unpleasantly surprised”

It comes a month after the company came under attack from activist Daniel Loeb’s Third Point which is calling for its legacy fossil fuel and clean energy divisions to be split into separate companies.

Shell is appealing the court ruling and has dismissed Loeb’s intervention as “symbolism”.

The overhaul was welcomed by investors in London today, where class A shares climbed 36p, or 2.2%, to 1677.9p.

The firm said folding the two share categories into one would make it “simpler to understand and value”.

It will reverse a structure the business adopted in 2005 when its dual-listed UK and the Netherlands arms unified under one group.

The company’s Dutch-listed A shares are liable for a 15% dividend withholding tax, which makes the shares less attractive in a buyback.

Shell said it has restricted its purchases to the UK B shares, which are not subject to the fee.

But quarterly purchases of B shares are capped by regulators at 25% of the average daily trading volume, around $2.5billion, restricting the available liquidity.

A “clear vote of confidence”

Chairman Sir Andrew Mackenzie said: “The simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive.

“As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition.”

Business Secretary Kwasi Kwarteng described the shift as a “clear vote of confidence in the British economy”.

He added: “We welcome news Shell is proposing to relocate its group HQ to the UK as part of their plans to accelerate the transition to clean energy.”

Adam Matthews, of the Church of England Pensions Board, said: “If this decision will enable the company to be more agile in order to execute its transition to net zero, then it should be viewed positively.”

The Dutch government, however, was “unpleasantly surprised.”

Stef Blok, the climate minister, said: “We are in a dialogue with the management of Shell over the consequences of this plan for jobs, crucial investment decisions and sustainability.”

Analysts were broadly supportive.

Giacomo Romeo, equity analyst at Jefferies:

"The company believes that the simplification of the corporate and shares structure will increase the efficiency of certain financial operations such as equity raises, demergers and buybacks.

"The latter is a particularly important point because, until now, Shell has been buying back only B shares. After the proposed restructuring, the liquidity of the pool of shares available for buybacks will increase

Russ Mould, investment director at AJ Bell:

“The London market was bolstered by the news Royal Dutch Shell is casting off its dual-share structure but unlike BHP and Unilever is not threatening divorce and has instead committed itself to the UK and remaining in the FTSE 100 index.

“The better comparison is with Unilever – which like Shell has Dutch and British roots. The consumer goods giant ended up being brought back from the brink of a move to the Netherlands in the face of angry protests from shareholders.

“It turns out Shell didn’t need to have its feet held to the fire, and it will remain a key constituent of the FTSE as it tidies up its complex A + B share structure.

Laura Hoy, equity analyst at Hargreaves Lansdown:

"Ultimately, the new structure would be a net positive for shareholders as it will streamline the company and make it easier to manoeuvre moving forward.

"Aside from the fact that the shares they hold will no longer come with a ‘Royal’ designation, this new alignment won’t change much for investors.

"The long-term growth story for Shell still rests heavily on the oil price. For now, buoyant oil prices are keeping the group’s cash coffers topped up, which has had a positive impact on debt and given the group the means to boost shareholder returns.

"However, with the inevitable shift to more sustainable energy picking up steam we suspect the need to invest in greener operations will keep a lid on what the group can pass on to shareholders.”

Shareholders will vote on the proposals on December 10. It will require a 75% vote in favour.

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