Oct 27 (Reuters) - Hedge fund Third Point has built a large
stake in Royal Dutch Shell and called on the oil major
to split into multiple companies to increase its performance and
Billionaire investor Daniel Loeb's New York-based firm,
which has successfully pushed for strategy changes at other
companies, owns roughly $750 million in Shell, according to a
person familiar with the matter. Shell's market value is nearly
Shell, like other big oil companies, faces mounting pressure
from investors and governments to de-carbonize its operations.
It has shed fossil fuel businesses while increasing its stake in
Loeb told clients in a letter that Shell has an "incoherent"
set of strategies for its various oil, chemicals, trading and
renewables businesses because of these pressures. There is room
for "improvement across the board at Shell," he wrote.
TWO SIDES HELD TALKS
Shell, which is expected to report third-quarter results on
Thursday, confirmed it has had preliminary talks with Third
Point. It "regularly reviews and evaluates the company's
strategy with a focus on generating shareholder value," the
Loeb's letter did not say how many separate companies it
wants Shell to form. The about 114-year-old oil giant should
consider separating its legacy energy business from its
liquefied natural gas, renewables and trading businesses, the
"Shell has too many competing stakeholders pushing it in too
many different directions," the billionaire investor wrote to
his clients in a letter seen by Reuters. Shell would benefit
from a different structure that would let it cut costs and
invest more aggressively in decarbonization, he added.
In its second quarter, Shell's reported $5.53 billion in
adjusted earnings the bulk of which came from oil and natural
gas, $1.3 billion from refining, trading and marketing, and $670
million from chemicals.
However, Loeb said Shell's last two decades have been
difficult for shareholders with annualized returns of just 3%.
The company's American Depository Receipts rose 2.5% on the news
of Third Point's involvement.
The Wall Street Journal first reported the stake.
BIG OIL IN CROSSHAIRS
Third Point's focus on Shell comes amid broader investor
scrutiny of Big Oil. Hedge fund Engine No. 1 took a $40 million
position in Exxon Mobil and won three seats on its board
Third Point, which manages about $17 billion in assets, has
previously pushed insurer Prudential Plc to break up and urged
chip maker Intel Corp to explore separating its chip design from
its semiconductor production.
The hedge fund has returned 29.5% in the first three
quarters of 2021 and its Third Point Offshore Fund has returned
an average 15.5% a year over the last 25 years, nearly double
the CS Hedge Fund Event-Driven Index's 7.3% increase.
Shell is the world's biggest fossil fuel retailer and aims
to become one of the world's biggest renewable electricity
Smaller Shell rivals Eni and Repsol have
already flagged plans to spin off parts of their renewables
businesses to help finance their transition to offering more
(Reporting by Svea Herbst in Boston and Arathy S Nair in
Bengaluru; Additional reporting by Shadia Nasralla; Editing by
Arun Koyyur, David Holmes and David Gregorio)