Shell Plans Share Structure Change to Boost Competitiveness, Payouts
Royal Dutch Shell unveiled on Monday a proposal to strengthen competitiveness and accelerate shareholder distributions, with the move coming less than three weeks after activist investor Dan Loeb’s Third Point purchased a stake in the Anglo-Dutch oil and gas exploration group.
Shell intends to change its structure to a single line of shares, which is “simpler for investors to understand and value” as it eliminates the complexity embedded in its current A/B class of shares, it said in a statement on Monday.
The group, which has been incorporated in the UK but has had a Dutch tax residence and dual share structure since 2005, now plans to align its tax residence with its country of incorporation. It said the current share structure may not be sustainable in the long term and moving away from it also helps in getting rid of constraints.
A conventional single share structure will allow Shell to accelerate distributions by way of share buybacks as there will be a larger single pool of ordinary shares to repurchase, it said.
Following the start of a $2 billion buyback program in July, Shell said in September that it would return an additional $7 billion to stockholders following completion of the sale of its Permian assets in the US.
Acknowledging Third Point’s investor letter Oct. 27, Shell said in a statement to the London Stock Exchange: “Shell’s Investor Relations team has had preliminary conversations with Third Point and we will engage with them, as we do with all of our shareholders.”
On Oct. 28, the day of Shell’s third-quarter earnings results, the company announced a dividend of $0.24 per share in respect of both the share classes, keeping its payout flat sequentially from the previous quarter.
The dividend was cut back to $0.16 per share in the first quarter of last year from $0.47 per share in the fourth quarter of 2019 in response to the COVID-19 pandemic.
Shell said the changes it has proposed will also bolster its ability to face challenges posed by energy transition by managing its portfolio with “greater agility.”
“The simplification will normalize our share structure under the tax and legal jurisdictions of a single country and make us more competitive,” Chairman Andrew Mackenzie said in the statement Monday. “As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition.”
Subject to shareholder approval, Shell’s board expects to change the company’s name from Royal Dutch Shell Plc to Shell plc. # Shell Plans Share Structure Change to Boost Competitiveness, Payouts
Read Also: Shell Unveils New Business Line in Nigeria
