The Acquisition of the Publicly-Held Shares of Shell ... · Whilst not a merger or acquisition in...
Transcript of The Acquisition of the Publicly-Held Shares of Shell ... · Whilst not a merger or acquisition in...
International In-house Counsel Journal
Vol. 3, No. 11, Spring 2010, 1
International In-house Counsel Journal ISSN 1754-0607 print/ISSN 1754-0607 online
The Acquisition of the Publicly-Held Shares of Shell Canada Limited1
DAVID BRINLEY
Vice President and General Counsel, Shell Canada Limited, Canada
MICHAEL COATES
Senior Legal Counsel - Corporate Mergers & Acquisitions, Shell International B.V.,
The Netherlands
The acquisition by affiliates of Royal Dutch Shell plc (“RDS”) of the publicly-held shares
of Shell Canada Limited (“Shell Canada”) was one of the major transactions in the oil
and gas sector in 2007. Whilst not a merger or acquisition in the “traditional” sense, the
existing majority interest held by RDS in Shell Canada raised a number of legal and
practical considerations. This article examines the key aspects of the transaction from
the point of view of RDS and Shell Canada.
BACKGROUND
Takeovers in the Canadian energy and natural resources sector have experienced an
upturn in recent years, and many of these transactions have been undertaken by groups
headquartered outside of Canada.
Although the global financial crisis may have dampened more recent activity, 2007 was a
significant year for mergers and acquisitions in Canada, particularly in the oil sands
sphere. Examples include the acquisition of Alcan by Rio Tinto2, Marathon acquiring
Western Oil Sands3, Statoil acquiring North American Oil Sands
4, and Prime West
Energy being acquired by the Abu Dhabi National Energy Company5.
1 This article is based upon a presentation given by the authors at the 2nd Institute for Energy Law,
Centre for American and International Law/ Section on Energy, Environment, Natural Resources
and Infrastructure Law, International Bar Association conference in London, United Kingdom on
10th November 2009. Special thanks to Shannon Cosmescu, Managing Counsel and Company
Secretary to Shell Canada Limited. 2 The refers to the acquisition by Rio Tinto PLC’s Canadian subsidiary, Rio Tinto Canada Holding
Inc., of the Canadian company Alcan Inc. 3 On July 31, 2007 Western Oil Sands (“Western”) announced a plan of arrangement with
Marathon Oil Corporation (“Marathon”) pursuant to which Marathon would acquire all of
Western's outstanding common shares and gain ownership of its 20 percent stake in the
Athabasca Oil Sands Project. 4 On June 25, 2007, Statoil announced that an offer by a Statoil subsidiary, Statoil Canada Limited,
to acquire all of the securities of North American Oil Sands Corporation (“NAOSC”) had been
satisfied, with approximately 98 % of the NAOSC shares having been validly deposited to the
offer. NAOSC was a private Canadian company with oil sands prospects in the Athabasca
region around Fort McMurray. 5 The Abu Dhabi National Energy Company PJSC, a publicly listed company on the Abu Dhabi
Securities Market, announced on January 16, 2008 that its wholly-owned subsidiary, TAQA North
Ltd., had completed its acquisition of Prime West Energy Trust by way of plan of arrangement.
2 David Brinley And Michael Coates
THE PLAYERS
Shell Canada
In 2007, Shell Canada was a large integrated petroleum company in Canada6, consisting
of both upstream and downstream businesses as well as the unique oil sands business,
which itself is something of a mix of mining, upstream exploration, and downstream
refining. Prior to the transaction, Shell Canada was publicly-listed on the Toronto Stock
Exchange, with RDS holding a majority (some 78%) of the outstanding shares in issue,
and having a market capitalization in excess of CDN $27 billion just prior to the
announcement of RDS’s intention to make its offer.
At the time, Shell Canada was governed by a board consisting of the Chief Executive
Officer (a Shell group secondee), two Shell-nominated directors and nine independent
directors, a structure which is consistent with effective corporate governance practice in
Canada7.
Royal Dutch Shell
The Shell group has a relatively long history. From 1907 until 2005, Royal Dutch
Petroleum Company (“Royal Dutch”) and The “Shell” Transport and Trading Company
p.l.c. (“Shell Transport”) were the two public parent companies of a group of companies
known collectively as the “Royal Dutch/ Shell Group”. In 2005, as part of the group
unification project, Royal Dutch Shell plc became the single parent company of Royal
Dutch and Shell Transport (the “Unification”).
According to securities documents published at the time8, the Unification would bring a
number of benefits to Shell, including increased clarity and simplicity of governance9
increased management efficiency10
, and increased accountability11
. The Unification also
allowed for greater flexibility in issuing equity and debt, including on an SEC-registered
basis. It was in this context that the acquisition of Shell Canada was undertaken.
DEAL LOGIC
The Canadian stock market contains a fairly large number of controlled companies, with
a great deal of foreign ownership. In common with the United Kingdom, the rules for
6 Shell Canada Limited 2006 Annual Information Form, 8 March 2007.
7 National Instrument 58-101 Disclosure of Corporate Governance Practices.
8Including the Listing Particulars issued by RDS in respect of the introduction of its “A” shares
and “B” shares to the Official List of the UK Listing Authority and to trading on the market for
listed securities of the London Stock Exchange and to Eurolist by Euronext Amsterdam, 19 May
2005. 9 Including a single, smaller board, a single non-executive Chairman and a single Chief Executive
with clear lines of authority. 10
This referred to improved decision making and management processes generally, including the
elimination of dual corporate headquarters in favor of a single corporate headquarters, the
elimination of duplication and the centralization of functions. 11
Including an Executive Committee reporting through the Chief Executive Officer to a single
board with a single non-executive Chairman.
Share Acquisition 3
takeover bids are relatively “bidder-friendly” in Canada – and certainly more bidder
friendly than in the US - in that regulators are somewhat hostile to “poison pills” or other
frustrating measures, or at least the length of time such measures can exist.
There are some areas in which Canada has more stringent requirements. In an unsolicited
offer, for example, if the offer consideration is cash (either in whole or in part) a bidder
must make adequate arrangements prior to launching a bid to ensure that the required
funds are available to make full payment for the securities to be acquired. Such financing
arrangements may be subject to conditions if, at the time the bid is commenced, the
bidder reasonably believes it to be remote that, if the conditions of the bid are satisfied or
waived, the bidder will be unable to pay for the securities deposited under the bid due to a
financing condition not being satisfied12
(in the US, in contrast, a bidder can make a
takeover conditional upon financing).
For RDS, there was a compelling business case to undertake the transaction. Aside from a
strong alignment with the Unification project described above, another important driver
was the facilitation of investment in Canada. At the time of the transaction, there was an
increasing interest in large, unconventional oil plays, including the Canadian “oil sands”
projects. For RDS, successful completion of this transaction would allow focused
management and governance over projects in Canada, and allow RDS to increase
decision making speed and consolidate control over its Canadian operations.
RDS STRATEGY
The existing ownership interest of RDS in Shell Canada impacted the deal strategy in this
transaction. As with any public M&A transaction, consideration had to be given to
whether a hostile or “friendly” transaction would be the preferred route. Also, the
communication methodology would be important - the fact of RDS’s existing ownership
interest meant that any approach would be made to the Lead Director13
of Shell Canada
given the potential conflict of interest of the Chief Executive Officer of Shell Canada
who had been seconded by the Shell group.
Deal governance and management would also be another critical issue. It was decided
that a small project team and a small decision making body would be preferable and that
Shell-nominated Shell Canada directors would be ring-fenced. In addition, a pre-existing
Canadian Shell subsidiary, Shell Investments Limited, would be used as the acquisition
vehicle and reconstituted with RDS representatives following resignations of relevant
Shell Canada representatives.
THE APPROACH AND AFTERMATH
The initial approach was made by RDS to Shell Canada’s Lead Director. Following the
approach, the senior management team of Shell Canada was convened. The approach
was significant from a number of perspectives; in particular, deal insiders were restricted
from being able to trade in Shell Canada shares and communication between Shell
Canada and RDS and their respective representatives would need to be limited.
12
Securities Act (Ontario), section 97.3. 13
An independent director identified by the board as the Lead Director to compliment the role of
the Chairman of the Meetings of the Board (a Shell-nominated director) and tasked to, among
other things, ensure that the board functioned independently of management.
4 David Brinley And Michael Coates
It was also necessary to identify senior officers of Shell Canada who might be construed
as being conflicted, or potentially conflicted, in the context of the transaction, and this
included certain senior Shell secondees.
The management of Shell Canada was tasked primarily with continuing to run the
business throughout this process. Shell Canada management was not tasked with the
process of negotiating with RDS directly, but nevertheless had a key role in providing
information necessary for the valuation.
As a matter of priority, a Shell Canada communications plan for the transaction was
required to be put in place. This was especially important given the range of interested
stakeholders including the relevant Canadian Federal and Provincial Governments,
employees, customers, suppliers, and of course Shell Canada shareholders.
After the approach was made, a Special Committee of the Shell Canada board was
formed. The purpose of this committee was to advise the Shell Canada board as to the
transaction generally, including as to strategic matters, including the extent to which co-
operation with RDS should be provided. Ontario Securities Commission Rule 61-50114
(“OSC Rule 61-501”) requires that the Special Committee be composed of independent
directors, which provides minority shareholders with a certain degree of protection.
The Special Committee was to negotiate directly with the RDS deal team, and for this
purpose it would have its own legal counsel and would select and oversee the financial
advisors. It was noted from the outset that the Special Committee had obligations to
ensure a fair process for all shareholders, especially in light of the regulatory preference
in Canada for letting shareholders have the chance to decide on the merits of a takeover
offer. In the face of a determined RDS effort, it was important to ensure that Shell
Canada shareholders had all the relevant facts at their disposal in deciding upon the offer.
ACQUIRING THE MINORITY
For RDS to be successful in its offer, it would need to secure the acceptance of a
“majority of the minority” of Shell Canada’s shares. There were several options for RDS
to pursue the minority shares. The most simple and direct approach, and the one which
ultimately was chosen, was to make an offer directly to shareholders.
When a majority shareholder holding more than 10% of the shares elected to pursue the
remaining minority shares, this was called an “insider bid” and, in the case of a large
listed company, fell under OSC Rule 61-501.
OSC Rule 61-501 recognizes that an insider bid is not inherently unfair, but does
recognize that these transactions are capable of being unfair and a majority shareholder
may have an informational advantage over smaller investors. As a consequence, it
imposes rules governing, among other things, information disclosure and valuation –
those things of most interest to an investor trying to decide if he or she should respond
favorably to an offer.
14
Ontario Securities Commission Rule 61-501 Insider Bids, Issuer Bids, Business
Combinations and Related Party Transactions.
Share Acquisition 5
The Shell Canada board was tasked primarily with discharging their fiduciary duties to
shareholders and ensuring that any recommended transaction was reasonable and fair to
shareholders.
In particular, the Shell Canada board took steps which included the following:-
(i) Seeking declarations that the board was clear of conflicts of interest. This required
that regular disclosures regarding shareholdings and outside interests were up to date
in the context of the transaction, including with respect to holdings of RDS shares or
options.
(ii) Ring-fencing RDS-nominated directors, of which there were two. This was achieved
in two ways: - first, when the entire board was required to meet, the RDS nominee
directors were advised to absent themselves from the meeting, or abstain from voting
on matters relating to the takeover - and more specifically, matters that may impact
the value of the company. Secondly, as mentioned above, a Special Committee of
independent directors was established to determine the fairness of the transaction.
Valuation would be the heart of the insider bid process. Under OSC Rule 61-501,
although RDS was required to pay the costs of the valuator, the valuator would be chosen
and supervised by the Special Committee. A robust, fair and independent valuation was
viewed as the most equitable way to address the informational disadvantage assumed to
be suffered by “public” (i.e. minority) shareholders.
The valuation would be expressed as an opinion which may or may not be endorsed by
the board of Shell Canada. Such valuations are often expressed as a range of values –
and usually are “ground up” and objective – meaning that the valuation does not take into
account the fact that a minority block of shares was proposed to be acquired. A valuation
may, however, take into account synergies realized by a majority bidder in the transaction
– in other words, the minority interest may be of more value to a majority shareholder
than some other party. The valuation opinion would also contain details as to the
methodologies used, which may include discounted cash flow analysis, net asset value,
comparable transaction value, or a combination of these.
The board of Shell Canada would then be asked to determine if the offer is fair and, if so,
to recommend that shareholders accept the offer. The main alternatives to a positive
recommendation were to recommend that shareholders do not accept the offer, or to
remain neutral and not express an opinion.
RDS was fortunate in that it already held a Canadian company, Shell Investments
Limited, with interests in Shell Canada. This would simplify the process for RDS,
although it was required to remove from the board of that company any Shell Canada
employees serving as directors.
Regarding disclosure in a merger or amalgamation, a decision by the Ontario Securities
Commission15
had confirmed the market practice that, in normal circumstances,
public disclosure is only required once both parties have received requisite board
15 In the matter of the Securities Act, R.S.O. 1990, c.S.5, as amended, and in the matter of
AiT Advanced Information Technologies Corporation, Bernard Jude Ashe and
Deborah Weinstein, 19 February 2007.
6 David Brinley And Michael Coates
approvals and a definitive agreement is executed. In this case, the size of RDS
ownership argued in favor of disclosure. As Shell Canada had U.S.-based shareholders
and was registered as a foreign private issuer with the U.S. Securities and Exchange
Commission, this also meant that applicable U.S. disclosure requirements would need to
be observed.
DISCLOSURE ISSUES
As part of the negotiations at the outset of the deal, a Confidentiality Agreement between
the parties was signed which included restrictions on the use of particular information.
Central to this agreement were disclosure limitations for use in valuations and on a “need
to know” basis with RDS. Additional flexibility to meet the parties’ regulatory needs was
also required, especially with respect to the RDS reserves auditing process, in respect of
which the Canadian information would be an important part.
A recommendation to the Special Committee was also made to set up parallel data rooms
for both the valuator and for RDS, and include the same information in both to ensure
equality. Major announcements would still need to be made to the market, and reserves
and reserve values would be a particularly important in that regard.
As part of this process, it was recognized that it was going to be necessary to change pre-
existing behaviors. Information exchanges that would be considered acceptable during a
“business as usual” period may not be acceptable during the valuation period. In this
regard, guidelines were put in place for staff on each side of the transaction regarding
what could, and could not, be communicated.
NEGOTIATING THE DEAL
Negotiations were conducted between RDS and the Special Committee as to the offer
price. Each quarter of a dollar per share became critical in light of the fact every one of
those quarters represented CDN $80M. The final price of CDN $45 per share represented
a 37.2% premium to the final price just prior to the initial announcement of RDS’s
intention to offer.
Following reaching agreement as to the price, the next step was to negotiate the “Support
Agreement”. The purposes of this agreement was to formalize the terms of the offer to
be made to Shell Canada shareholders, and to secure in writing the support of the
directors and the cooperation of Shell Canada during the period of the offer.
From the acquiror’s perspective, it was necessary to have a fundamental minimum
condition without which obligation to purchase the Shell Canada shares would not be
triggered. This would be that holders of a majority of the outstanding shares accepted the
offer. Although RDS would require some flexibility to amend its offer, Shell Canada
would not without its consent want RDS to increase the threshold of the minimum
condition, decrease the consideration, change the form of the consideration or change to
scope of the offer.
RDS also had other requirements in relation to the Support Agreement. These included
that Shell Canada run the business as usual during the interim period and not do anything
to prejudice the offer process. RDS would also want to avoid Shell Canada changing its
debt or equity structure, making unusual payments to shareholders or officers, and
importantly, it would want Shell Canada to inform RDS of any competing offers.
Share Acquisition 7
OPTION HOLDERS
Employees holding options over Shell Canada’s common shares could simply be given a
tender opportunity similar to shareholders. When RDS’s offer became public, the trading
price should stabilize and there would not be a material incentive to hold options. One
difficulty, however, was the options’ three year vesting period and employees not being
able to liquidate them immediately in all circumstances. RDS could purchase those
employee options but in doing so it would lose the valuable employee incentives for
which the options were created. Moreover, RDS had ceased issuing employee options at
that time and did not want to create a new incentive scheme solely for the purposes of the
transaction.
As a consequence, it was agreed with RDS to create a special purpose entity to issue to
Shell Canada’s employee option holders, options over RDS shares. The structure is
summarized in the diagram below.
Shell Canada
Options
Corporation
RDS shares
from public
market Option contracts
Employee Option
Holders
Employee Option
Holders
Employee Option
Holders
Employee
Option Holders
Tender Existing SCAN Options
Shell Canada Options Corporation (“SCOC”) would be the vehicle used for this purpose
and would be funded in a way to enable it to enter into private option contracts with
option holders in respect of RDS shares in a manner that complied with the terms of an
exemption order granted by Canadian securities regulators. To meet any share obligations
under those contracts arising when the options vested, SCOC would purchase RDS shares
on the market and subsequently transfer them to the relevant employee option holders.
For this purpose, it was required to be determined how many RDS options should be
given in exchange for Shell Canada options, and the exchange value was calculated by
specialized consultants. SCOC would be owned by a Canadian trust with services
provided by Shell Canada.
8 David Brinley And Michael Coates
Another reason for setting up the special purpose vehicle was to ensure that Canadian
option holders would not lose capital gains treatment granted to them under Canadian
law. Changing the options into another compensation form would jeopardize their tax
status, and it was considered important to preserve their benefits in a holistic sense.
THE TENDER CIRCULAR
The Tender Circular was a central document in the transaction and was the mechanism by
which RDS’s offer was conveyed to Shell Canada shareholders. The document contained
the following key provisions:
1- The terms of the offer, including provisions that RDS could withdraw or extend the
offer period unless certain conditions were met or waived, and most importantly, the
condition that a majority of the outstanding shares were tendered. Other conditions
included the securing of government approvals, the absence of material litigation or
other adverse events which would fundamentally impact the value of Shell Canada
or hinder the completion of the transaction.
2- A detailed description of the mechanics of the offer. This required some creative
thought as to how to deal with the variety of human behaviors present in the
investing world. The document needed to provide an option for Shell Canada
shareholders who simply changed their mind – basically, the right to revoke any time
prior to take-up and payment. The needs of different groups of shareholders -
ranging from large sophisticated institutional shareholders to retail shareholders –
would also need to be considered. In addition, some shareholders held their shares in
trust, or commonly in a broker’s name. A mechanism termed “guaranteed delivery”
was used for those who could not access their certificates quickly - this involved a
pledge for those shareholders to deliver and a grace period within which to deliver
the actual certificates - in this case within 3 days of the expiry of the offer.
3- RDS wanted clearly to preserve its right to extend the duration of the offer. It is
fairly common in deals such as this to extend the offer for tactical reasons.
4- RDS was required to specify the terms of take-up and payment for shares. Standard
terms are to take-up within 10 days of the expiry of the offer period if all conditions
are met and to pay within 3 days of take-up. Since shareholders could revoke their
tender of shares up until the take-up, RDS wanted to ensure that it could take-up
sooner than 10 days if it achieved desirable result.
5- Shell Canada option holders were required to be covered in the circular (see
discussion above).
6- RDS wanted to preserve an option to go into the market to purchase additional Shell
Canada shares if strategically useful. There were, of course, limits under law on what
it could purchase - 5% being the maximum, and any such purchases were required to
be accompanied by a daily disclosure to the markets regarding the amounts so
purchased.
7- Required to be included were also a number of items of background information for
Shell Canada shareholders, including information regarding both RDS and Shell
Canada. Also included was chronology of the events leading up to the offer, and key
Share Acquisition 9
agreements between the parties relating to the offer – notably the Confidentiality
Agreement and the Support Agreement.
8- Finally, because Shell Canada had U.S. shareholders, there were a number of
Special Factors which were required under U.S. securities laws, including: the
purpose of offer, the alternatives considered, the plans for Shell Canada if the offer
were successful, the source of funding for the offer, the role of the valuator and how
it was selected, role of the Special Committee and the relationships existing between
any interested parties.
THE DIRECTORS’ CIRCULAR
As mentioned above, the Tender Circular was a key document produced by RDS and
mailed to Shell Canada shareholders. For Shell Canada’s part, the recommendation of the
Shell Canada board in support of the offer would be embodied in the Director’s Circular,
which would be mailed out in the same envelope as the Tender Circular.
The Directors’ Circular would reflect much of the work undertaken by the Special
Committee and contained the background of deliberations by the Special Committee and
the Board of Directors of Shell Canada.
In addition, the Directors’ Circular contained the recommendation of the Special
Committee to the board in respect of the offer, including that:
(i) the offer was fair to shareholders (and discussion of material factors considered
in reaching this conclusion); and
(ii) a discussion of the valuation process and the valuator (and attaching an
independent valuation and fairness opinion)
Other disclosures were required to be included in the Directors’ Circular, including a
description of the Support Agreement, disclosure of certain ownership interests of the
Shell Canada directors, disclosure of the principal holders of Shell Canada shares,
disclosure of compensation and benefit arrangements between Shell Canada and its
officers, and disclosure of ties between RDS and the Shell Canada officers.
POSSIBLE SCENARIOS
With the Tender Circular and Directors’ Circular posted to Shell Canada shareholders,
there were three main possible outcomes of the offer:-
Scenario A – RDS achieves less than a majority of the outstanding minority
If reasonably close to achieving a majority of the outstanding minority, RDS could
extend the offer period in 10 day increments until it achieved the “Minimum Condition”
– i.e. 50% + 1 of the minority shares held – and increase consideration in doing so. In
addition, RDS could go into the market to purchase shares up to a further 5%, but any
such purchases would need to be disclosed publicly. If ultimately unsuccessful, the offer
could be terminated and either the purchased shares redelivered to selling shareholders,
or tendered shares retained by RDS to bide its time for another attempt. In terms of the
RDS and Shell Canada interface in such a case, the status quo would be maintained until
the offer was formally terminated.
10 David Brinley And Michael Coates
Scenario B – RDS achieves a majority of minority, but less than 90% of the minority
This would mean that the ability to acquire the remaining Shell Canada minority interests
would be within RDS’s control, but additional steps would be required, including
convening a special meeting of Shell Canada shareholders to propose an amalgamation or
another second stage transaction. A second stage transaction approval had one and
possibly two requirements. First, if RDS had less than 90% of all Shell Canada shares
(which is different from the 90% of the minority in Scenario C below) then it would need
to carry the vote at the shareholder meeting (requiring 2/3 of all shares voting at the
meeting) and have minority approval (a majority vote of minority shares voting at the
meeting). However, RDS could vote the minority shares that it received in the tender,
which would carry the minority requirement. If RDS had 90% of all Shell Canada
shares, then it did not need minority approval provided statutory (or equivalent) dissent
and fair value rights were made available to minority shareholders. In terms of
implications for the RDS and Shell Canada interface in such a case, executive authority
could not transfer to RDS until after the special shareholder meeting. Prior to such
meeting, RDS could replace Shell Canada directors and could, with Shell Canada board
approval, replace executives, but Shell Canada would still be subject to rules requiring a
majority of independent directors, an independent Audit Committee, and minority
shareholder rights.
Scenario C – RDS acquired 90% of the minority shares either through the original
offer or through an extension
In such a case, RDS could send all Shell Canada shareholders a “notice of compulsory
acquisition” and pay the consideration for the untendered shares into a trust. In such a
case, the rights of minority shareholders would cease (except for the right to receive fair
value for their shares) and RDS could require an immediate resignation of the Shell
Canada board. In terms of corporate control, there would be an immediate transfer of
executive authority to RDS.
THE FINAL OUTCOME
March 16, 2007 was the date of the initial expiry of the offer. By this stage, RDS had
achieved a majority of the minority but less than 90% of the public float it desired. A
decision was taken by RDS to extend the offer for 10 days.
By March 30, 2007, more than 90% of the public float had been acquired by RDS. A
statutory compulsory acquisition procedure was initiated by RDS to acquire the
remaining untendered shares by mailing a notice to the remaining shareholders and to
Shell Canada. Under applicable law, RDS could consider the acquisition complete upon
the expiration of the dissent process that forms part of the compulsory acquisition
procedure. The effective completion date of acquisition was April 24, 2007 and
thereafter the Shell Canada board of directors was reconstituted and board governance
restructured.
REGULATORY ISSUES
As with any major transaction, regulatory issues played an important part in the
successful outcome. In addition to the requisite antitrust analysis when a non-Canadian
entity seeks to acquire a Canadian company, Investment Canada will have the right to
review the transaction and determine whether or not it is in the best interests of Canada.
Share Acquisition 11
Undertakings could have been required in the case of either competition or foreign
investment review though due to the factors of this case, the relevant authorities decided
not to impose undertakings.
In addition, an opinion from Revenue Canada was required in support of the SCOC
mechanism to ensure that option holders do not lose their capital gains benefits by
switching to RDS options.
Canada is somewhat unique in its securities regulation in that there is no unified Federal
securities regulator. Therefore, securities laws exemptions and approval to terminate
reporting issuer status from the securities regulators for all 13 provinces and territories
was also required. The delisting of Shell Canada from the Toronto Stock Exchange
followed the successful completion of the offer.
CONCLUSION
With the offer successfully completed, it was recognized that integration of Shell Canada
into the broader Shell group would require a significant amount of focus. Although it is
one thing to effect the mechanics of a takeover, it is quite another to secure the
anticipated benefits. How RDS integrated Shell Canada systems, processes and personnel
into the broader Shell group was considered an extremely valuable part of the transaction.
Due to having secured more than 90% of the minority shares, RDS was in a position to
move very quickly on the transfer of executive authority. This began with a
reconstruction of the Shell Canada board of directors. Due regard was paid to the strong
governance practices of the outgoing directors, and also in respect of the staffing of key
management positions.
In order to look after the many necessary aspects of the integration, an Integration Team
was formed which also functioned as a management team. This was an important
decision, as the alternative would have been to keep a separation between the integration
team and the ongoing management of the day-to-day business.
It was loss of focus on business that was considered the primary risk during the transition
period, and it was determined that having a single team was justified due to a number of
factors including the fact that Shell Canada had already adopted or was familiar with
many RDS processes, a necessary level of collaboration prior to the merger; and the
desire to have continuity of accountability in the hands of the same persons both during
and after the integration.
The Integration Leadership Team consisted of persons appointed by RDS and those
already in Shell Canada in order to draw on the strengths of both organizations. The team
included representation from the businesses, namely Oil Sands, Downstream, and
Exploration & Production, as well as key functions: Legal, Health Safety and
Environment, Finance, Human Resources, IT, and External Affairs. The team was also
assisted by a Project Management Office with respect to organizational matters. The
Project Management Office would maintain a scorecard for the team measuring progress
and success in a number of pre-defined issues.
The post transaction integration process went well allowing Shell Canada to become a
wholly-owned member of the Shell group.