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Last Updated: Wednesday, 20 July 2005, 16:22 GMT 17:22 UK
New Shell shares slip on debut
Shell logo outside petrol station
The merger is Shell's biggest overhaul in its 100-year history
Shares in newly unified oil giant Royal Dutch Shell dropped on their London market debut on Wednesday.

Shell "A" shares, which came from the group's former Dutch parent, were marked 58 pence lower to 1,766.5p.

Its "B" shares, originating from its UK parent, relinquished early gains to also trade lower at 1,806.5p.

Until now, the firm has been 60%-owned by Royal Dutch Petroleum and 40%-owned by Shell Transport & Trading.

Executives of the new group were chosen from the boards of each holding company with the aim of restoring confidence in Shell through unifying the group.

It is hoped that merging the two sides will simplify the chain of command after management was blamed for a crisis which led to Shell having to cut its oil reserves.

Tax difference

Analysts expected "B" shares to trade at a premium to the "A" shares because of less strict tax rules on dividends in the UK.

"A" shares have to comply to the Dutch tax regime which imposes a 25% tax on dividends.

But "A" shares may eventually benefit from a statement from Shell which said it would favour making buybacks of "A" shares over "B" shares.

Meanwhile, shares of the old Royal Dutch Petroleum are still trading in Amsterdam because the new group failed to secure a 95% backing for the deal from shareholders, preventing a squeeze out of minority shareholders.

Shell still hopes to regain those shares through a tender offer and delist Royal Dutch.

According to one analyst, the fall in the price of Shell shares in London on Wednesday probably reflected technical issues and many investors, particularly private buyers, were waiting on the sidelines for the dust to settle.

Now the merger is completed, the spotlight will point back to Shell's business fundamentals, which currently compare unfavourably with its big rival BP.

Just 19% of Shell's reserves were replaced last year and last week the company announced that the cost of its flagship Sakhalin II gas project in Russia was set to balloon to $20bn, twice its original budget.




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