The Observer: Boom time for Wall St as Shell fights back
Frank Kane and Oliver Morgan
Sunday April 25, 2004
In a move that could lead to the biggest investment banking bonanza in history, Royal Dutch/Shell, the crisis-stricken oil giant, is considering taking on a Wall Street firm to oversee a radical shake-up of its creaking corporate structure.
The plan, which is being advanced by non-executives of the Anglo-Dutch group, could result in the 'unification' of the British and Dutch arms of the company, seen by many as the source of the scandal over oil reserves that has overtaken Shell since the start of the year.
According to a City source, Shell is being urged to take on a New York 'bulge bracket' firm to advise on the mammoth task of reshaping the £100 billion giant. Three US banks are thought to be up to the job: Citigroup, America's largest financial firm, Goldman Sachs and Morgan Stanley.
'Every bank in the world would like to get in on it,' said the source, 'but there aren't that many that could do it. There are all sorts of implications that make it very, very difficult. They might hit on a tax problem that would halt the whole thing.'
Shell non-executives are pushing the plan, which they hope will put an end to the three-month crisis at the company. Last week, the chief financial officer, Judy Boynton, became the latest casualty in the boardroom bloodletting, after chairman Sir Philip Watts and head of exploration, Walter van de Vijver.
The investment banking fees from restructuring Shell and repairing its shattered reputation would be enormous. The chosen bank would also have to oversee a re-evaluation of Shell's world-wide oil reserves. 'The problem has been that what was supposed to be "proven" wasn't proved, so the point is to go out again and prove it,' said an industry expert.
The move comes as US lawyers prepare class action suits against Shell seeking damages of up to $500m.
Lawyers at New York-based Milberg Weiss Bershad Hynes & Lerach say their case was strongly boosted by the admission of senior executives last week that they lied about the true situation.
The firm is representing mainly US employees, numbered in the tens of thousands, who hold Royal Dutch/Shell stock as part of their pension plans.