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Daily Telegraph: Shell merger approved amid fury over tax bill

Daily Telegraph: Shell merger approved amid fury over tax bill

Wednesday 29 June 2005

By Christopher Hope, Business Correspondent (Filed: 29/06/2005)

Shell yesterday came under fire from British shareholders who are nursing a £77m tax bill as a result of the merger of its British and Dutch companies into a £100billion oil and gas giant.

The news came as shareholders in Shell Transport and Trading and Royal Dutch Petroleum voted to merge, creating one company called Royal Dutch Shell. Lord Oxburgh of Liverpool, Shell Transport’s chairman, said: “This is not a day I ever thought I would see.”

Shell has previously maintained that it has no idea how many British holders of Royal Dutch shares are liable for capital gains tax as a result of the merger, which was triggered by Shell wrongly categorising over a quarter of its proven reserves last year. The Association of Private Client Investment Managers and Stockbrokers estimate that 3,000 Britons own £192m-worth of Royal Dutch stock and are liable for £77m in capital gains tax.

Yesterday one investor complained at Shell Transport’s meeting that holders had been “hung out to dry and left with a very substantial capital gains tax bill. Nothing has been done to help them”.

Martin Simons, another investor, suggested compensating the affected investors from the $115m fees paid to the banks such as Citigroup, NM Rothschild and ABN Amro which offered advice on the deal. “They fouled up and they should pay,” he said.

Peter Hatfield, a third investor, asked: “They did not ask to change their shares and now they are stuck with them. Are you going to sit back and say ‘it’s tough luck fella’?”

Lord Oxburgh said the number of UK-resident holders in Royal Dutch only became apparent in the past fortnight because many of the shares were held anonymously in nominee accounts.

Shell had been in talks with the Inland Revenue but the offer was fair on a pre-tax basis to all shareholders and there was little Shell could do to ease the tax hit. He added: “We remain concerned about this and we will do what we can on their behalf. But there is a limit to what we can do.”

After three and a half hours, during which Shell Transport held its last annual meeting, a court meeting and then an extraordinary meeting to discuss the merits of the merger with Royal Dutch, 99.75pc of investors in Shell Transport voted in favour of the transaction.

In the Hague, 97.4pc of Royal Dutch investors accepted the merger. Speaking afterwards, Lord Oxburgh, who retires when the deal goes through next month, said: “I see this as a real move forward for the Shell Group. The coming together of these two great companies is the culmination of co-operating for nearly 100 years.”

Shell admitted the streamlined structure made acquisitions easier to finance. However, Lord Oxburgh said Shell was unlikely to be interested in bidding for Unocal, the US oil and gas company which is the subject of a bid tussle between Chevron and CNOOC, the Chinese state oil company. “This sort of deal is not on our radar screen,” he said.

At Royal Dutch’s annual meeting in the Hague, Jeroen van der Veer, chief executive, added: “We certainly have our eye on acquisitions but at the moment it’s too expensive and it doesn’t create shareholder value.” Shell Transport’s shares closed up 17 at 545p.

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