Financial Times: Dual identity has some advantages
By Clay Harris
Mar 16, 2004
Fortis, one of the models being studied by Royal Dutch/Shell as it considers a shake-up of corporate governance, was a pioneer of the new wave of bi-national companies.
Although a youngster by comparison with Shell at 97 years and Unilever at 74 years, the Dutch-Belgian financial services group was created in 1990 through the merger of Amev and AG.
Fourteen years later, two legal entities remain, but Fortis continues to pursue a policy of "progressive adaptation".
Only last week, it announced that the companies would have a single chairman, Maurice Lippens, from May since his counterpart, Jaap Glasz, would reach retirement age in 2005.
This followed the appointment of a single chief executive, Anton van Rossum and creation of a single executive committee in 2000 and the unification of the two companies' shares a year later. They retain head offices in Brussels and Utrecht.
A Fortis representative said yesterday: "We said at the time that we would create a unified company. It takes time."
BHP Billiton, another company being studied by Shell, also retains two separate companies - one (plc) in England and one (Ltd) in Australia - but has had unified management since the merger in 2001. Its antecedents are more complicated than those of Fortis since Billiton had emerged as the UK-listed mining arm of the South Africa's Anglo American group.
Within BHP Billiton, 60 per cent of shares are in the Australian company and 40 per cent in the UK company. Both have level 2 American depositary receipts traded in the US, and the UK company has a secondary listing in Johannesburg.
The UK and Australian shares are not "fungible" - interchangeable - but they rank equally in terms of security and voting rights.
Dividends are declared in US dollars, with the sterling and Australian dollar payments determined two days before declaration. Shareholders can also elect to receive dividends in US dollars or rand.
From the beginning, BHP Billiton has seen many benefits from the two-company structure. There was no takeover premium to be paid, no "flowback" of shares from one market to the other after the merger, as well as tax benefits.
The diverse shareholder base is also an advantage. BHP can be "local" in London, Sydney and Johannesburg, and 25 per cent of its shares are held in the US.
Set against that, BHP Billiton only gets an index weighting for the local proportion of its shares, ie 40 per cent in London and 60 per cent in Sydney, so it does not get the full benefit among trackers that it feels its global size should merit.
GlaxoSmithKline, the third company on Shell's list, also had a dress rehearsal for its current structure, created in 2000, through the earlier mergers of SmithKline Beckman of the US and Beecham Group of the UK, on one hand, and Glaxo and Wellcome of the UK, on the other.
Unlike Fortis and BHP Billiton, GSK has never had a two-company structure, so it is unclear what aspect recommends it to Shell.
GSK has a US style board, with only three executive directors and 11 non-executives.