The Guardian: Shell to scrap its takeover defences
Friday June 18, 2004
A “poison pill” that has deterred predators from making a bid for Shell is to be scrapped under a proposal to be put to shareholders at the company’s annual meeting next year.
The Dutch side of the business is protected via a system of priority shares, the removal of which could trigger takeover interest in the troubled oil group, said analysts.
The plan to abolish this defence mechanism, which is common in Dutch firms but little used in Britain, was revealed alongside other details of the company’s review of corporate governance published yesterday.
The progress report follows pressure from Shell’s shareholders for the firm to be more open about a review it is undertaking following the reserves scandal which has badly damaged its share price.
It has finally revealed that the terms of reference for the review are centred on a “possible” simplification of the complex board and group management structures which have been in place for 100 years.
It is also looking at ways to improve decision-making processes and accountability plus enhancing effective leadership of the group as a whole.
It confirmed that a traditional unified board to which one chief executive would report – called for by many shareholders – is one of the issues being looked at.
“Nothing is ruled out at this stage,” it insisted, while repeating its intention to report the final results of this review – but not until November this year with formal agreement planned for next year’s annual meeting.
The update was welcomed as a significant step forward by some Shell shareholders including, Eric Knight, managing director of Knight Vinke Asset Management, who had written an open letter calling for at least a minimal level of disclosure.
“This is an encouraging statement and the first tangible evidence to outsiders that deficiencies in Shell’s governance and board structures are finally being addressed,” he said yesterday.
“We still have some questions regarding the issues to be addressed by this steering group, but [this year's] AGM will no doubt offer the opportunity to resolve these remaining questions.”
The Shell review is being carried out by a steering group drawn from the boards of the two parent companies – Shell Transport & Trading in Britain and Royal Dutch Shell in Holland.
The chairman of the group is Sir John Kerr and its members are Maarten van den Bergh, Sir Peter Job, Jonkheer Aarnout Loudon and Jeroen van der Veer, chairman of the group of managing directors.
The company update yesterday stated: “The board of Royal Dutch will propose to its annual general meeting of shareholders in 2005 to abolish the priority shares.”
It admits in its annual report that these shares, which give huge influence to individual board members, “can be considered an anti-takeover measure”.
One London-based analyst, who asked not to be named, said: “Once removed it would make sense to make a bid for one half of the group potentially turning the other half into minority shareholders unless they agreed to be taken over as well.”
Mr Van der Veer promised to simplify Shell’s structure, which has been criticised following the January announcement that it must cut its proven reserves figure by 20%.
This was followed by an internal review into the issue which led to the exit of chairman Sir Philip Watts, exploration boss Walter van de Vijvre and eventually the finance director, Judy Boynton.
Despite yesterday’s update, this year’s annual meeting, to be held on June 28, is still likely to be a difficult affair for Mr Van der Veer and other directors with some industry experts questioning whether shareholders will want to know whether the surviving directors themselves should not have resigned also.