United Shell aiming for a brighter future

SHELL shareholders have cast historic votes to bring together the British and Dutch branches of the company - ending nearly 100 years of believing that two heads were better than one. Shell Transport holders voted by an overwhelming 99.75% to 0.25% and Royal Dutch Petroleum by 97.4% to 2.6% to unify into a single company, to be known as Royal Dutch Shell.

They were immediately rewarded as Shell shares surged 17p to 545p.

That was partly due to crude oil's rise to near $60 and partly because the new giant will loom very large in the Footsie 100 share index, so that investment funds which track the index must load up with stock.

But it is also due to hopes that Shell, under the leadership of Dutchman Jeroen van der Veer, has transformed itself and that its new 'one board, one chief executive' structure will lift its performance and banish last year's reserves scandal to a painful memory.

The market is already celebrating this, lifting the shares an astonishing 56% since their 349p low after the scandal erupted.

This adds £19bn to the UK arm's market value, and lifts the likely value of the new group to £130bn, pushing it past BP - by a nose - to become the largest UK quoted company.

Stock markets always anticipate, and in this case they are anticipating a great deal. But Shell bosses seem to agree.

In London, exploration director Malcolm Brinded hailed 'a great day for Shell'. In Holland, chemicals director Rob Routs said the old structure was as different from the new as 'night and day'. Both boards promised 'greater clarity, simplicity, efficiency and accountability'.

Left out of the party are up to 3,000 UK investors who for various reasons held shares in Royal Dutch. They face capital gains tax bills of up to £77m from the deal.

Shell investors complained that these individuals were being 'hung out to dry' with 'nothing being done to help them'.

But after three shareholder meetings lasting 3½ hours, chairman Lord Oxburgh offered sympathy, but nothing else - suggesting that there are limits to Shell's new ' listening mode'.

He said: 'We continue to have a great deal of concern,' but gave no signal of acting on it. Finance director Peter Voser said bluntly: 'It is not going to change.'

Shell's touchy-feely promise to be 'a good neighbour' in its worldwide projects was challenged repeatedly at the annual meeting by residents of Texas, Nigeria's Delta, Russia's Sakhalin island, Durban in South Africa, and the Philippines, who complained of pollution and leaks damaging their health. Oxburgh admitted: 'Things happened which should not have happened'.

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But there seemed to be limits to the peer's concerns for the environment and the poor. When a Durban resident complained of illnesses after petrol pipes leaked under homes, Oxburgh played down the issue, arguing that communities attacked by Aids were more vulnerable to other diseases.

Environmental protesters briefly disrupted the meeting. One presented the board with a mini-coffin and others sang 'Shell is hell' before being removed by security.

Shell's new bonus plans also came under fire. A significant 153m votes were cast against them, 10.64% of the total, with 15m abstaining. Some 9.46% voted against a deferred bonus plan, 6.6% against the board pay report.

After the merger, it will be much easier to raise debt or share issues for acquisitions. But the company played down talk that it might challenge China's CNOOC in its bid for Unocal of the US.

Oxburgh said: 'This sort of deal is not on our radar screen.' Brinded added that with oil near $60 'it is hard to find value'. There were a few lonely voices against unification.

One shareholder queried the 'gigantic' £150m fees to advisers, and former executive James Moorhouse lamented the demise of the UK arm as 'an absolute scandal'.

Most investors seemed more worried about the annual meeting moving to Holland. But only time will tell whether the new, unitarian Shell has done enough to leave behind the problems of its past.

Shocked into changing history

SHELL'S historic dual structure dates back to 1907 - and was caused by a string of bizarre misfortunes for the UK company, Shell Transport.

Though there are many differences from last year's reserve scandal which ultimately overturned the 98-year-old structure, there are some eerie echoes.

On December 15, 1903 the Daily Mail reported: 'The pessimistic rumours about Shell are unfortunately borne out'. Shell, founded by Marcus Samuel in 1897, was struggling.

One of its tankers ran aground in the Suez Canal. Another sent to rescue it caught fire. Then a new fuel was rejected by the Royal Navy as inferior.

The shares slumped and Samuel had to seek help from Royal Dutch boss Henri Deterding. In the deal they struck, Royal Dutch owned 60% of the group, Shell 40%. That meant two boards. Ultimately it meant two of everything, more than 100 operating companies, and scores of committees.

Authors Ian Cummins and John Beasant described the management structure as 'a club sandwich constructed by a deranged chef'.

Almost a century later, the shares slumped again after chairman Sir Philip Watts revealed Shell had booked 3.9bn barrels of oil and gas as 'proven' reserves in breach of US regulators' rules.

That led to fines of £83m and cost Watts his job. Enraged City shareholders told Shell it must become more accountable.

New chief Jeroen van der Veer decided to bite the bullet - much to the relief of managers and investors. Most investors agreed, backing the unity plan.

But as one pointed out: 'If this is such a good idea, why didn't you do it years ago?'

? Shell Shock (Mainstream Publishing, £16.99).