Royal Dutch and Shell Oil Together at Last : Certificate Finalizes $5.7-Billion Merger
Shell Oil, the nation’s seventh-largest oil company, became a wholly owned subsidiary of the giant Royal Dutch-Shell Group last Friday, completing a $5.7-billion merger that was launched nearly 1 1/2 years ago.
A certificate of merger, effective at the end of the business day, was filed Friday with the secretary of state of Delaware, where Shell is incorporated, merging Shell into SPNV Holdings, another Royal Dutch-Shell subsidiary.
It was the second big deal concluded last week for Royal Dutch-Shell, which is based in Britain and the Netherlands and is the world’s second-largest oil company after Exxon.
Last Wednesday, Royal Dutch-Shell agreed to pay $1 billion to Occidental Petroleum for half of its huge oil holdings in Colombia.
Royal Dutch-Shell, which has held a solid majority of Shell’s stock since it helped form the company in 1922, had been attracted by the opportunity to gain complete control of Shell’s large oil and natural gas reserves and the cash income they generate in the politically secure United States.
The acquisition includes the rich Belridge Oil, which Shell bought in 1979 for what was then a record $3.6 billion. The highest price tag for a merger in the United States has since grown to $13.3 billion, the tab picked up last year when Chevron bought Gulf.
Sanford Margoshes, an oil industry analyst for the securities firm of Shearson Lehman Bros., said that Royal Dutch-Shell, after assimilating Shell, would be positioned for acquiring another large U.S. oil company but that it was unlikely such a bid would come soon.
Meanwhile, Margoshes said, Royal Dutch-Shell has acquired “one of the best-run companies in the United States,” a leader in the refining and marketing of petroleum products with substantial oil and natural gas holdings. By increasing its investment and income from the United States, he said, Royal Dutch-Shell also was “improving the overall quality of its earnings.”
Royal Dutch-Shell, which earned nearly $4.9 billion on revenue of $86.7 billion in 1984, bought a company that earned almost $1.8 billion on revenue of $20.9 billion last year. Shell’s proven developed and undeveloped reserves in the United States included 2.042 billion barrels of oil, 279 million barrels of natural gas liquids and 7.455 trillion cubic feet of natural gas.
Royal Dutch-Shell said that Shell’s headquarters would remain in Houston, that the company’s management would stay on “and that the business and affairs of Shell Oil will be operated under their control in the same manner as before.”
John Bookout, the president of Shell, issued a statement in Houston, saying Shell was pleased that the merger was being completed and adding: “We fully intend to continue and enhance our tradition of service to consumers in the years to come.”
Royal Dutch-Shell already owned 69.4% of Shell’s stock when it offered to buy the remaining shares on Jan. 24, 1984, for $55 a share. It later raised the bid to $58 a share and then agreed to pay an additional $2 a share to settle a lawsuit by some minority shareholders who claimed that the offer was unfairly low.
Last Thursday, a Delaware state judge rejected an attempt by a Shell shareholders’ group to set aside that settlement, and Royal Dutch-Shell moved to complete the merger even though some appeals are pending.
By completing the merger before today, Royal Dutch-Shell will be able to save $8.35 million in dividend payments. Shell had earlier declared a regular quarterly dividend of 50 cents a share but said it would be paid to shareholders of record as of today. Since Royal Dutch-Shell will own all the stock as of today, it will not have to pay the minority shareholders.
Through its earlier offer, Royal Dutch-Shell had raised its stake in Shell to 94.6% of the outstanding stock, enough under Delaware law to gain complete control without having to seek the consent of the holders of 16.7 million minority shares. It said that, once the merger became effective, each outstanding share will cease to exist, converted instead into a right to receive the same payment from Royal Dutch-Shell.
Some dissident shareholders believe the company’s stock is worth up to $110 a share. Under Delaware law, those shareholders may ask a court to set the value of their stock, but they risk being awarded less than the $60 a share that Shell has promised.