“Marriage after a century of cohabitation (…)” (Financial Times, 28 June 2005) is one of the more unconventional ways to describe the merger that took place between Shell Transport & Trading Company plc. and N.V. Koninklijke Nederlandsche Petroleum Maatschappij on the 21st of December 2005. As mentioned in their joint announcement: “This restructuring and merger of certain subsidiaries will achieve governance, management and fiscal efficiencies for the Shell group”. The Royal Dutch Shell merger (as it is referred to) was one of the largest mergers-and-acquisitions transactions in Europe that year, with a value of $80,088.37 billion. Although it has been formally called a merger, some consider it a mere internal restructuring. Hence it was subject to discussion among investment bankers and data providers. According to Aad Jacobs, then-chairman of the supervisory board, it was a time for a shift: “(…) one company, one board and one chief executive”. A merger is a complex process, consisting of several phases and various aspects that need to be taken in to account to determine whether the merger has potential or –in case it has already been finalized- it is considered a success. In the following paragraphs, we will first look at what the merger exactly entails, then we will look at the legal aspects while looking in retrospect at the 1907 merger which has created the framework in which the company has operated for almost hundred years (before the 2005 merger caused some significant changes). Furthermore, an insight will be given regarding the economic aspects, by looking at the valuation and level of success.
Description of the merger
In July 2004, reports surfaced about Shell aiming to move towards a more profound reform of its corporate governance and organizational structures. Royal Dutch and Shell made use of a dual-ownership structure for almost hundred years and has been owned for 60% by Royal Dutch Petroleum and 40% by Shell Transport and Trading. By July 4 2005 the Shell Group had formed a new holding company Royal Dutch Shell plc, holding a 98,5% stake in Royal Dutch and a 100% stake in Shell Transport. Royal Dutch in its turn held a 60% stake in Shell Petroleum, sharing ownership with Shell Transport (40%). The merger between Royal Dutch and Shell Petroleum aims to remove this dual-ownership structure by essentially cutting out Royal Dutch as it will be the disappearing company and letting Royal Dutch Shell plc. gain a 100% stake in the acquiring Shell Petroleum NV by making sure the remaining (1,5%) minority shareholders are unable to participate in the new enterprise that Shell Petroleum NV will be as a subsidiary of Royal Dutch Shell plc.
In order to provide for this transaction to go as efficient and fast as possible, a statutory merger under Dutch law is chosen as the transactional form. By making use of the legal merger all assets and liabilities of Royal Dutch will be transferred to Shell Petroleum NV by universal title of succession, thus allowing for the ownership to transfer and the Shell Corporate structure to be restructured in a single transaction. This method was used as opposed to f.i. a transfer of shares, which would not allow for the desired outcome to be handled in a single transaction.
By unwinding the pre-merger cross-holding structure Royal Dutch Shell are considered to enjoy from significant governance, management and fiscal efficiencies for the Shell Group.
Legal Part
Early stages of merger talks took place in 1896. Royal Dutch decided it was not the right time for a merger because it would not have been sufficiently beneficial for the company. While it was too early for a merger, Royal Dutch and Shell established a working relationship in 1902. Marcus Samuel (the founder of Shell) became the chairman and Henri Deterding (who was the chairman of Royal Dutch) was managing director and responsible for day-to-day management. Through a joint venture by both companies, the Asiatic Petroleum Company (hereafter Asiatic) was founded in 1903. Asiatic was incorporated in London and operating in Asia. Asiatic was the defendant in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd. – case, a landmark decision by the UK House of Lords who established that directors are the controlling minds of the company and that therefore the company can be held liable for their misdeeds. During 1904 – 1905, Royal Dutch and Shell were considered to be equal in terms of their net worth. During that time, Shell encountered problems with the production and refining process in Borneo. The company was in a vulnerable position due to its financial underperformance. Thus, Royal Dutch had greater bargaining power and according to Henry Deterding, merger negotiations promised to be very fruitful.
The merger of the interests of the two (until then autonomous) companies, Shell and Royal Dutch took place in 1907. There was a competitive struggle between the companies. Royal Dutch had more knowledge and experience with marketing and transport, something Shell was lacking. Both companies were also competing with the Standard Oil Group, who, during that time, had a dominant position on the market, controlling up to 80 % of the market of petroleum products. When the two companies merged in 1907, Royal Dutch Shell was created, with 60 % of the shares owned by senior partner Royal Dutch Petroleum (based in the Netherlands) and 40 % of the shares by Shell Transport & Trading (incorporated under British law). Royal Dutch managed the (at the time) underperforming production and refining activities of Shell and subsequently created the opportunity for Shell to improve its performance. The board of Shell did not have full control over the company anymore but was allowed to remain member of the board. Another benefit of the merger with Royal Dutch for Shell was the guarantee of business continuity and quality of the board of directors. Shell did not have sufficiently qualified managers to run the company and was relying on Royal Dutch for its managerial support. The merger had as its consequence that British politicians no longer supported Shell.
Both companies were fully integrated when they merged. Their operations were considered to be complementary to a large extent. Through merging, the strength of each other could counterbalance the weakness of the other. Royal Dutch was able to expand their market by using Shell’s comprehensive distribution mechanisms. The existence of synergistic benefits was evident for both Shell and Royal Dutch. Royal Dutch developed its marketing organization through use of Shell’s market knowledge and trade connections.
In the early part of the 20th century, stakeholders did not have any considerable influence on the decision-making by Royal Dutch and Shell. The possible effects the merger may have had on employees and consumers and their reactions were not considered to be as important as it has become in present day mergers. Shareholders owned 42 % of Shell and thus had limited influence. However, shareholders with preferred stock were given the right to appoint directors. This was possible for a selected few of confidants.
The due diligence phase took place in April 1906. The preliminary investigation was aimed at discovering what possible legal, fiscal and political implications the cross-border merger could have held. To maximize merger benefits, a legal framework was construed with a dual ‘Byzantine’ structure: both Royal Dutch and Shell operating as separate companies with separate listings and headquarters. This dual structure has been dissolved during the 2005 merger. The rationale behind this dual structure was retaining access to British and Dutch operating areas, no forced dismissal of board members and avoidance of complex discussion concerning the legal seat. This legal framework was completed within a few months. It was a relative quick process because company law was not as well developed and there were no official merger requirements that had to be fulfilled. This legal framework was developed by their (the company’s) own lawyers.
One of the biggest challenges was how their joint venture Asiatic should be integrated in the legal framework. The family Rothschild owned one third of the shares of Asiatic, which – according to the family- was a lucrative venture for them. Initially the plan was to end the joint venture but the Rothschilds refused. Royal Dutch and Shell did not have sufficient financial resources to buyout the family. Therefore Asiatic was excluded from the merger. As a consequence, two subsidiaries were created instead of one. These subsidiaries worked closely together with Asiatic. The Anglo-Saxon Petroleum Company Limited was created in London, with its primary task controlling all distribution and storage of petroleum products.
The merger was at risk of failing when financial experts at Royal Dutch discovered a hidden debt of £580,000 in the accounting report of Shell. This is because it would have been considered to be a takeover by Royal Dutch instead of a merger between parties due to its unequal equity ratio. A total of 70 % of the income belonged to Royal Dutch and its 25 % share in Shell gave Royal Dutch the right to appoint two Dutch non-executive directors in the board of Shell. Taking all of the above into account, it is clear that Royal Dutch was considered the dominant party in this merger. Royal Dutch and Shell both had different board structures that remained in tact after the merger. Shell held on to it one-tier board structure which consisted of twelve directors, whereas Royal Dutch continued its two-tier board structure with a board of directors and a supervisory board.
In September of that year, Royal Dutch and Shell concluded a letter of intent. An official presentation of their merger has never taken place. Their joint objectives, expected growth or total value of their synergies has also not been publicized. The reorganization as a consequence of the merger did not have a major impact. As mentioned earlier, this is due to the fact that their operations were considered to be complementary. Synergetic benefits were found in the integration of their fleet and distribution mechanisms. Production and refining activities on the other hand, did not create a high synergistic value. The majority of its activities took place overseas, thus it seemed logical for the local management there to continue its decision-making. Both headquarters in London and The Hague maintained its regional, functional and administrative duties. The only notable change however, was the development of specialized headquarters. The London headquarter became the financial and commercial centre, whereas The Hague became the centre of technology and production. London remained in control of its activities in British territories and The Hague was still in control of their activities in the Dutch East Indies and continental Europe.
After over a 100 years of a complicated dual-ownership structure where The Royal Dutch/Shell Group was owned by Royal Dutch Petroleum Ltd. (60%) and Shell Transport & Trading Plc(40%) from 1907 until 2005, Royal Dutch Shell proposes to engage a reorganisation of the ownership interests of Royal Dutch Shell and part of its subsidiaries into a Dutch fiscal group and a UK fiscal group. As part of these transactions, Royal Dutch will merge into Shell Petroleum through a statutory merger under Dutch law.
The legal merger (in accordance with art. 2:309 DCC) of 2005 between the Shell Petroleum N.V. and its parent company Royal Dutch Petroleum Co. has resulted in the disappearing of the latter company which is in line with part 7 Chapters 2 and 3 of Book 2 of the Dutch Civil Code. All assets and liabilities of the Disappearing company were to be transferred to the acquiring company by universal succession of title and the Disappearing company Royal Dutch has thereby ceased to exist.
As a result of the merger between Shell Transport and Trading and Royal Dutch Petroleum a new holding company named Royal Dutch Shell plc. has been formed, incorporated under English Law.
After this merger of the Dutch companies, Royal Dutch Shell plc. gained a 100% interest in the Acquiring company, thus simplifying the corporate structure of the Shell group.
Prior to the decision to merge Royal Dutch and Shell Petroleum the board has had carefully considered the advantages and disadvantages from the perspective of the interests of Royal Dutch instead of the perspective of one shareholder or a group of shareholders. In order to do this the interests of all relevant parties were weighted in a reasonable manner as this would conclude the action in the best interest of Royal Dutch and its enterprise.
A decisive element for using a statutory merger instead of a ‘squeeze-out’ of minority shareholders was the fact that the Unification Transaction through statutory merger would be less time-consuming and more efficient than a squeeze out procedure under Dutch law.
Another option that was reviewed was to initiate a second offer to exchange Royal Dutch Shares for Royal Dutch Shell Class A ordinary shares. This option was however declined as this would require similar documentation, amount of time, cost and effort as the previous exchange offer. This option would also not result in the compulsory acquisition of the remaining interest in Royal Dutch, and therefore a squeeze out procedure would still have to be initiated, which was considered undesirable.
Applicable Law
As stated in the merger proposal Dutch law was applicable on the merger between the two companies. Book 2 of the Dutch Civil Code (“DCC”), namely chapters 2 and 3 are applicable on the merger between the two Dutch public companies. No use is made of any directives as the merger is a national one and no change of seat has been entailed by the merger, as Shell Petroleum NV as Acquiring company remains seated in the Hague.
Articles of Association
As explained in the merger proposal, the articles of association of the acquiring company will be implemented and amended according to changes in the corporate structure.
Prior to the merger the articles of association of Royal Dutch have been amended to reclassify the share capital. This was done by classifying X shares held by Royal Dutch Shell, Y shares held by minority shareholders with eligible UK residency and ordinary shares held by Royal Dutch Shell and minority shareholders that have received cash for their shares. This allowed Royal Dutch Shell do use its voting power (98,5% of total votes) in order to vote pro on the merger proposal.
Board structure
Both companies make use of a one-tier board structure, as the two-tier board structure of Royal Dutch was abandoned as from July 4 2005 after the formation of Royal Dutch Shell plc. The board of Royal Dutch Petroleum constitutes of Executive and Non-Executive Directors. As the merger is completed the board of the Disappearing company will be dissolved and the board of the acquiring company remains seated. The restructuring has allowed Shell to move from from the used dual-board structure into a single-board single-tier structure.
Timeline
19 September 2005: Proposal for unwinding the 60:40 cross-holding of Royal Dutch in Shell Petroleum NV including a statutory merger is considered by the board of Royal Dutch Shell.
26 October 2005: Final terms of proposed Unification Transaction as well as possible alternatives for the transaction are considered by boards of Royal Dutch Shell, Royal Dutch and Shell Petroleum NV.
31 October 2005: All members of the Board of Management of the merging companies signed the merger proposal as referred to in art. 2:312 paragraph 1 of the Dutch Civil Code and have drawn up an explanation of the merger proposal according to art. 2:313 paragraph 1 DCC. Interim financial statements of both companies have also been drawn up as the merger proposal was filed more than 6 months after the end of the last financial year and thus the last financial statement, this is done in according to art. 2:313 paragraph 2 DCC.
All documents including those mentioned in art. 2:314 and 2:328 DCC were filed the same day at the trade register responsible for registration of both companies.
1 November 2005: The merging companies announce (by newspaper: NRC Handelsblad) the merger proposal documents have been filed at the trade register and also stating that Board of Management of the acquiring company has the intention to merge with the Disappearing company.
16 December 2005: The General meeting of shareholders of Royal Dutch Petroleum Co. have adopted the resolution to merge with Shell Petroleum N.V. with a majority of the votes cast, in compliance with the articles of association of Royal Dutch Petroleum.
In accordance with art. 2:331 paragraph 1 DCC the Board of Management of the acquiring company agreed on the resolution to merge in accordance with the text of the merger proposal
The notarial deed of the first amendment of the articles of association of Royal Dutch is executed
19 December 2005: The notarial deed of the second amendment of the articles of association of Royal Dutch is executed
20 December 2005: The notarial deed of amendment of the articles of association of Shell Petroleum NV is executed.
The deed of merger between Royal Dutch Petroleum and Shell Petroleum NV is executed
21 December 2005: Merger between Shell Petroleum NV and Royal Dutch Petroleum has come into effect what constitutes that the latter ceases to exist. All its assets and liabilities are transferred to Shell Petroleum NV by universal succession of title.
Court Cases
Even though most shareholders agreed with the merger proposal (96.3% of British and 97.4% of Dutch shareholders) there has been some controversy regarding the merger as minority shareholders (owning 1,5% of outstanding shares) were ‘squeezed out’ of their participation in the acquiring company. This was due to the exchange ratio of the Acquiring company that required an amount of 31,978,937 Royal Dutch shares to get 1 share in Shell Petroleum NV, which would mean only Royal Dutch Shell plc. would qualify to participate as it held 98,5% of Royal Dutch shares. The Enterprise Division of the Court of Appeal Amsterdam was asked to provide a judgement and/or settlement regarding the share price of Royal Dutch paid to the minority shareholders and the legitimacy of the merger as a whole. Represented by Trafalgar Funds the minority shareholders in question mentioned the possible incompatibility of the merger with art. 1 First ECHR Protocol and art. 3 of the Third EG Directive. Minority shareholders plead that Shell Petroleum NV used the merger to make sure that minority shareholder were able to only get cash for their shares and no shares in Shell Petroleum NV, thus circumventing the rules of the buy-out procedure stated in art. 2:92a Civil Code, allowing them to establish the price per share by a chosen bank (in this case ABN AMRO N.V.) instead of by an independent expert or the court. This action is, according to Trafalgar, incompatible with the reasonableness and fairness standard laid out in art. 2:8 Dutch Civil Code, as shareholders are in this case not at all treated equal.
The court’s decision was based on the grounds put forth by Trafalgar Funds namely that the merger was just a way to circumvent the rules of the buy-out procedure, by not allowing the shareholders a participation in Shell Petroleum NV. Following this the court decided that the merger as it stood was in fact incompatible with art. 1 First ECHR Protocol and art. 3 of the Third EG Directive, and ordered that the price per share of N.V. Royal Dutch Petroleum Co. was to be set at €51,21 per share (as this price reflects a 2:1 ratio based on closing market prices on Euronext Amsterdam) including interest payable from the date of purchase.
In the end a settlement was made between Royal Dutch and Trafalgar.
Economical Part
The financial advisor of Royal Dutch, the disappearing company, was ‘ABN AMRO’. ABN AMRO also analysed the fairness of the merger and also gave its opinion on the Exchange Ratio that would be paid to the Minority shareholders in lieu of the Merger Consideration. The banks opinion was submitted to the Board of Royal Dutch on the 31st of October 2005 and overall their opinion was that it was a fair transaction.
As demonstrated below, Royal Dutch Shell is the leading corporations among its competitors with certain and strong dividends to allot to its shareholders i.e. Royal Dutch Shell has a good financial position for securing dividends.
Motives
Mergers and acquisitions are not only a legal product. There are many economical aspects that play a part as well. This is also the case in the merger between Royal Dutch and Shell Petroleum. Before looking at the numbers it is useful to look at the motives. Different types of mergers have different motives and different effects. Mergers can be categorized as conglomerate, vertical or horizontal. The Royal Dutch/Shell merger is the latter. Horizontal mergers occur where two companies who “operate in the same space, often as competitors offering the same good or service”.One of the main reasons for the merger was to reduce the costs in various divisions of the corporation, for example the procurement, production distribution etc, also known as cost synergies. Also, the revenue synergies also played a part as one of the motives of both merging corporations was to increase the overall revenue through expansion. A merger expands a corporation’s market power by increasing the value of a market share. Also, the two merging corporations may want to merge for tax cutting purposes. It is proven that share prices are effected by the location of the trade. The Tax office of Royal Dutch Shell was transferred to the United Kingdom after the merger in 1907 ´, but now it is in Hague and thus so as to avoid double taxation. This is so that double taxation of dividend income (Advance Corporation Tax) is eliminated. Existing in their current form since 1907 the companies found reason to change the corporate system partially due to grave mistakes made in the booking of their reserves account. Through the horizontal merger Royal Dutch and Shell hoped to achieve governance, management, and fiscal efficiencies for the Shell Group. It also simplified the corporate structure and thereby hopefully reduced the chance on future grave mistakes. The impact of the merger and its simplification becomes clear in the following diagram.
Gains
The acquirer Royal Dutch Petroleum, decided to merge with Shell Trading and Transport. The merger and transaction between Royal Dutch Petroleum with Shell Trading and Transport value amounted to $80,1 billion in total. Even though motives as discussed above are important so is financial gain from a merger. In this paragraph will be attempted to illustrate, as complete as possible, the financial benefits and costs of the merger resulting in net gain or loss. Simply put, the gain for the acquiring company is the difference between the new value of the combined companies and the value of the companies were they separate. The cost would be calculated by taking either the amount of cash paid or the value of shares issued minus the value of the target company. The net gain would be the gains minus the costs. So how does the Royal Dutch/Shell merger fit in all of this.
To this end it is necessary to understand how the division of shares and interests was before the merger. There is one more important step between the before and after situation as shown in the diagram above.
Steps made to get to that point were explained in the same document:
Shell Transport will receive newly issued bonus shares in SPCo and Royal Dutch shall consent and take other necessary actions to allow Shell Transport to be registered as holder of such shares. As consideration for Royal Dutch consenting and taking such actions, Shell Transport will transfer to Royal Dutch the entire interest in Shell Petroleum held by Shell Transport (other than four B shares that Shell Transport will retain for U.S. tax purposes);
Royal Dutch will issue new Royal Dutch Shares to Royal Dutch Shell and, in consideration for such issue, Royal Dutch Shell shall contribute to Royal Dutch all of its shares in Shell Transport;
Royal Dutch will contribute its remaining SPCo shares to its subsidiary Shell Transport; and
Upon completion of the above steps, Shell Petroleum and Royal Dutch will effect the Merger, following which Shell Petroleum will be the surviving entity and Royal Dutch and the Royal Dutch Shares will cease to exist
Now the structure before the merger is clear and the last step is to merge Royal Dutch (RD) and Shell Petroleum N.V. (SPNV) where the former is the disappearing company and the latter is the acquiring company.
Before looking at the price paid for them first thing to look at is the value of the companies.
The issued share capital of Shell Petroleum N.V. amounts to twenty-one billion one hundred seventy-eight million seven hundred seventy-six thousand nine hundred and seventy-eight euro (EUR 21,178,776,978), divided into: - one hundred five (105) class A shares of two hundred million euro (EUR 200,000,000) each; - one class B share of one hundred seventy-eight million three hundred seventy-six thousand nine hundred and seventy-eight euro (EUR 178,376,978); and - four (4) class B shares of one hundred thousand euro (EUR 100,000) each. The issued share capital of Royal Dutch amounts to one billion nine hundred thirty-two million two hundred twenty-four thousand euro (EUR 1,932,224,000), divided into three billion four hundred fifty million four hundred thousand (3,450,400,000) shares with a par value of fifty-six eurocent (EUR 0.56) each, one million two hundred thousand (1,200,000) of which are held by the company itself.
Minority Shareholders
The boards of the Royal Dutch and Shell petroleum signed the Merger proposal respectively.
One of the terms of the merger was that; for every one class A share in the Royal Dutch shares, A Shareholder of Shell petroleum had to pay for 31,978,937 shares. Conversely, one class B share of Shell Petroleum will be allotted in exchange for 105 Class A shares for 28,521,530 Royal Dutch Shares.
According to the Dutch Law, any shareholder who holds less than 31,978,937 Royal Dutch Shares will not be entitled to receive any Class A or B shares of Shell petroleum. These shareholders are minority shareholders and will be given the Royal Dutch interim dividend i.e. financial consideration for their for their Royal Dutch Shares. The consideration in monies has to be offered to the minority shareholders completion or signing of the Merger proposal on 21st of December 2015. At the time of the merger, each Dutch minority shareholder who have unexpired subscription will be given the option to be compensated in cash which will be determined by section 2:320 paragraph 2 of the Dutch Civil Code. Shareholder of Royal Dutch shares will receive a dividend on 0.46 euros per share which will be payable on December 15, 2005. On the 21st December of 2005 all minority shareholders prior to the merger will cease to exist.
Evaluation of profits after the merger
As demonstrated by Table A on the right, the total assets held by the Royal Dutch were $187,446 million in 2004 which increased to $235,276 million in the year of 2006.
The financial report of 2006 states that the merger was a success as the earnings per share increased by 4.7% . There was an increase of 5% of cash returned to shareholders in 2006 than in the previous year. Also, the return of dividends to shareholders increased by 9% in 2006 compared with 2005.
From 30th September 2005 to 30th September to 2006 there was a positive increase of ca 7% of total assets owned by the Royal Dutch Shell. The total assets of a company are the added value of liabilities and stockholders equity which can be converted into monies. The total assets of a corporation depict whether there is an existing value of a corporation and whether investing in a project will reap profits or not.
The table on the left shows the revenue increase in dollars ($). Also, it depicts the earnings per share which significantly increased from 2004 to 2006.
Conclusion
The merger between Shell Transport & Trading Company plc. and N.V. Koninklijke Nederlandsche Petroleum Maatschappij took place on the 21st of December 2005. The main purpose of the merger was to “achieve governance, management and fiscal efficiencies for the Shell group”. However, the two companies had merged in 1907, Royal Dutch Shell was created, with 60 % of the shares owned by senior partner Royal Dutch Petroleum (based in the Netherlands) and 40 % of the shares by Shell Transport & Trading (incorporated under British law). By July 4 2005 the Shell Group had formed a new holding company Royal Dutch Shell plc, holding a 98,5% stake in Royal Dutch and a 100% stake in Shell Transport. All assets and liabilities of Royal Dutch were transferred to Shell Petroleum NV by universal title of succession, thus allowing for the ownership to transfer and the Shell Corporate structure to be restructured in a single transaction. This method was used as opposed to transfer the shares, which would not allow for the desired outcome to be handled in a single transaction. . Careful consideration was given to the interests of the minority shareholders who held 1.5% of the shares in the soon to be merging companies. A decisive element for using a statutory merger instead of a ‘squeeze-out’ of minority shareholders was the fact that the Unification Transaction through statutory merger would be less time-consuming and more efficient than a squeeze out procedure under Dutch law. The remaining (1,5%) minority shareholders were unable to participate in the new enterprise by making sure that Shell Petroleum NV will be as a subsidiary of Royal Dutch Shell plc. Royal Dutch was able to expand their market by using Shell’s comprehensive distribution mechanisms. The existence of synergistic benefits was evident for both Shell and Royal Dutch. Royal Dutch developed its marketing organization through use of Shell’s market knowledge and trade connections.
One of the main reasons for the merger was to reduce the costs in various divisions of the corporation, for example the procurement, production distribution etc, also known as cost synergies. Also, the revenue synergies also played a part as one of the motives of both merging corporations was to increase the overall revenue through expansion. A merger expands a corporation’s market power by increasing the value of a market share. Also, the two merging corporations may want to merge for tax cutting purposes. It is proven that share prices are effected by the location of the trade. The Tax office of Royal Dutch Shell was transferred to the United Kingdom after the mergerThere is an evident economical gain that took place as a result of the merger; “Shell is one of the strongest companies with regards to finance, in the energy sector. In FY14, Shell reported a net income of $9.03 billion. It was lower than the previous year, but such sound financial results in the depressed oil prices arena is certainly a positive thing for the company.” Also, the merger was one of the largest mergers of the year. The applicable law chosen to determine the merger was Dutch law, specifically Book 2 of the Dutch Civil Code (“DCC”), namely chapters 2 and 3 are applicable on the merger between the two Dutch public companies. No use is made of any directives as the merger is a national one and no change of seat has been entailed by the merger, as Shell Petroleum NV as Acquiring company remains seated in the Hague. The financial report of 2006 states that the merger was a success as the earnings per share increased by 4.7% . There was an increase of 5% of cash returned to shareholders in 2006 than in the previous year. Also, the return of dividends to shareholders increased by 9% in 2006 compared with 2005. The Royal Dutch Shell amounted to a value of $80,088.37 billion. There were doubts whether the merger was just a mere internal restructuring, however this has proven to be wrong. By unwinding the pre-merger cross-holding structure Royal Dutch Shell are considered to enjoy from significant governance, management and fiscal efficiencies for the Shell Group.
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