FINANCIAL TIMES: Lex live: Dual primary listings: “Two heads are said to be better than one, though Unilever and Royal Dutch/Shell have seemed intent on proving the opposite of late.” (ShellNews.net) 18 Feb 05

Published: February 18 2005

Two heads are said to be better than one, though Unilever and Royal Dutch/Shell have seemed intent on proving the opposite of late. Management failures and poor growth are prompting these Anglo-Dutch bi-cranials to put their respective heads together again. However, other dual-headed companies are thriving - just look at Anglo-Australian miners BHP Billiton and Rio Tinto.

All these groups are the product of mergers. Dual-headed structures offer advantages in goodwill accounting and tax treatment that straight takeovers do not. They also expand the potential investor pool and address political sensitivities on foreign ownership.

Inevitably, however, they increase complexity, both for management and investors seeking to value the business. The latter problem is more easily overcome, especially as sophisticated market participants such as hedge funds help to narrow any arbitrage gap between the two classes of stock.

Both Shell and Unilever have clearly suffered from Janus-faced management rather than their double-headed structure per se. However, Shell’s fixed 60-40 ownership split has also impeded use of its stock for big acquisitions while competitors used their own paper to consolidate. The more recently formed dual-structured companies’ unified boards prevent confusion at the top and are more flexible in their ownership structure. Having two heads can be attractive, but once the original merger has bedded down there is a strong case for seeking unity.