So, Royal Dutch/Shell Group, the world’s third-biggest oil company, has said it will take the step expected by many people after the minor flap earlier this year over its oil reserves and combine its two parent companies, altering its century-old corporate structure. This will mean a single board, chairman and chief executive. (Royal Dutch/Shell Group is 60%-owned by Royal Dutch Petroleum Co., which is listed in Amsterdam, and 40%-owned by Shell Transport & Trading Co. which is listed in London. The companies have separate boards, and IIRC a joint committee of manging directors oversees the group.)
The current ownership split will be reflected in the new company, Royal Dutch Shell Plc, with shareholders of Royal Dutch Petroleum owning 60% of the new business. To carry out the combination, Royal Dutch Shell will make an exchange offer for Royal Dutch Petroleum’s stock, and then Royal Dutch Shell will acquire Shell Transport.
Royal Dutch Petroleum stockholders will receive A shares of Royal Dutch Shell, and owners of Shell Transport stock will get Royal Dutch Shell B shares. (U.S. investors can opt to receive ADRs.) The two classes are otherwise identical, with the same voting rights and dividend values. Royal Dutch Petroleum investors will get two A shares for each of their shares, and Shell Transport stockholders will get 0.2874 B share for each of their shares, to reflect the larger amount of Shell Transport stock outstanding.
Dividends will be paid quarterly, instead of semi-annually, which doesn’t particularly concern me. What does concern me is that the dividend will now be declared in euros, though owners of Royal Dutch Shell B stock will of course receive payment in sterling. I could do without the currency risk, which was an important factor in selecting Shell Transport as an investment over BP Plc. (Royal Dutch Petroleum declares its dividend in euros and Shell Transport declares in sterling. BP reports earnings and declares dividends in dollars even though it’s a U.K. company.) Well, that and the non-crisis “crisis” over the reserves knocking the stock down to a silly price at which I was only too happy to buy in. 