The leaders of Royal Dutch Shell plc on Oct. 28 countered a notable activist investor’s call to break up the energy giant by saying that they and their “holistic and coherent strategy” are needed to help fund the world economy’s energy transition in the coming decades.
Hedge fund Third Point this week said it has acquired a major stake in Shell – Reuters reported it is worth about $750 million – and wants the storied company to separate its legacy energy business from its ventures in liquefied natural gas, renewable energy sources, and trading. Doing so, the firm led by Dan Loeb argues, would let executives cut costs and add to their decarbonization initiatives, growing the value of the separate businesses.
Shell officials acknowledged that they had received Third Point’s letter and have had preliminary talks with the firm, which has over the years also pushed for major changes at other blue-chip names such as Intel, Nestle and Sony. During a conference call with analysts Oct. 28, Chief Executive Officer Ben van Beurden said companies such as Shell are undergoing a transition as they balance producing the oil and gas products the world still needs while using their financial muscle – particularly during a period of high oil prices such as today’s – to fund the work of building a net-zero energy system.
“The energy transition that we are talking about […] is going to be an energy transition that will only come about when companies with the scope, skill and scale like us actually make it happen,” van Beurden said.
Speaking to reporters, van Beurden said Shell prefers to have long-term investors with which it can build deep relationships and said replacing such owners with hedge funds isn't helpful to the energy transition because of their different investment philosophies.
"I understand symbolism is also needed but it doesn't really make a contribution," he added.
Shell’s leaders earlier this year put before shareholders their “Powering Progress” strategy for navigating the energy transition. That proposal received the support of 89% of the company’s investors, including Dutch pension ABP, the firm that recently sold its stake to Third Point. ABP executives this week said they are selling more than $17 billion worth of holdings in fossil fuel companies because they haven’t been able to push industry players to invest more aggressively in decarbonization.
