The Third Points of the Activist fund calls for shell breaking
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Activist hedge funds are under pressure to cut their hold on the Royal Dutch Shell after accusing Third Point of building a large stake and failing to harvest oil supermajors with inconsistent tactics.
The third issue, led by Daniel Loeb, urges Shell to divide itself into “multiple independent companies,” including a “legacy” arm focused on oil and gas that could “reduce capex beyond what is already promised.” According to a source familiar with the matter, his stake is close to $ 750m.
The New York hedge fund has taken the step after a court in The Hague ordered an Anglo-Dutch company to speed up plans to reduce greenhouse gas emissions. Hedge Fund Engine No. 1 also follows Shell’s successful activist campaign against U.S. rival ExxonMobil.
In a letter to stakeholders seen by the Financial Times, Third Point states that Shell has “pushed many competing stakeholders in many different directions, resulting in an inconsistent, conflicting set of policies seeking to satisfy multiple interests, but none satisfactory.”
While Shell’s legacy business can handle fossil fuels, Third Point said a separate organization should focus on clean energy to “combine reasonable cash returns with aggressive investments in renewability and carbon reduction technologies”.
“Adopting such a bold strategy will accelerate the reduction of CO2 as well as a significant increase for stakeholders, a victory for all stakeholders,” the letter said.
Third Point is one of the most prolific investor investors on Wall Street and manages assets worth about $ 20bn. He has previously targeted companies such as Intel and Disney.
The chief executive of ExxonMobil and Chevron, as well as the US chief of Shell and BP, intervened in one of the world’s largest oil companies before they could testify in Congress on whether they had misled the public about their role. Fossil fuels cause climate change.
In a landmark ruling in May, a Dutch court ordered Shell to slow down its carbon-dioxide emissions, with judges concluding that the company’s plans to reduce pollution were not strong enough.
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On the same day, ExxonMobil shareholders selected three new board directors nominated by Engine No. 1, an upstart fund manager who ran a six-month proxy campaign in which the company said its plan to increase oil and gas production was an “existing threat”. “
Shell says its oil production peaked in 2019. It plans to cut production by 1-2 percent as it moves spending on renewable energy and other low-carbon technologies such as hydrogen. The company last month sold Permian shale oil business in Texas for 9.5bn, an area previously described as the core for its oil and gas business.
Shell said it welcomes “open dialogue” with all stakeholders, including Third Point, but is committed to implementing the energy transition strategy published in April, stressing that it has the support of 89 percent of stakeholders.
“Shell’s investor relations team has had a preliminary conversation with Third Point and listened carefully to their ideas, as we do with all our stakeholders,” the company said.
Andrew McKenzie, who was appointed president of Shell in May, has experience dealing with activist investors. When he was chief executive of BHP, the world’s largest miner, Elliott Management launched an aggressive campaign to get the company out of the oil business and into a single listed group. Mackenzie pushed back against Elliott’s demands, although BHP is now in the process of selling its remaining oil assets and consolidating its double-listed structure.
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