Activist Fund Says Royal Dutch Shell Should Break Itself Up

A leading activist investor called Wednesday for Royal Dutch Shell to break itself up, bolster its low-carbon investment and return more cash to shareholders.

Bemoaning how the Anglo-Dutch giant's stock valuation has lagged that of oil industry rivals, activist Daniel Loeb called for a "bold strategy" shift from the oil giant as he announced that he took a stake in the company.

"Shell has too many competing stakeholders pushing it in too many different directions, resulting in an incoherent, conflicting set of strategies attempting to appease multiple interests but satisfying none," Loeb wrote in a letter to shareholders.

The founder of New York-based hedge fund Third Point, Loeb said he bought shares in Royal Dutch Shell in the second and third quarters. The Wall Street Journal reported the stake as worth over $500 million, while the Financial Times said it was worth almost $750 million.

Loeb, who rose to prominence following activist battles at Yahoo, Sotheby's and other companies, suggested that Shell establish a standalone "legacy" business connected to petroleum that "could slow capex beyond what it has already promised, sell assets and prioritize return of cash to shareholders."

The other standalone business could undertake "aggressive" investment in renewables and other low-carbon businesses, Loeb said.

Loeb's letter comes as traditional oil companies find themselves at a crossroads.

In May, a Dutch court ordered Shell to slash its greenhouse gas emissions in a landmark victory for climate activists. The ruling was the latest setback for conventional oil companies amid rising public concerns about climate change.

At the same time, oil companies are also currently enjoying a much improved business climate as commodity prices strengthen, and are projected to report much better earnings later this week.