Wolf Capital Management Issues Open Letter on Shell Plc's Offer for Shell Midstream Partners

The following is an open letter from Wolf Capital Management, LLC:

Wolf Capital Management, LLC is a holder of Shell Midstream Partners ("SHLX") units and has written the Conflicts Committee to express our concern that it may acquiesce to the deeply undervalued offer by Shell plc for the remainder of SHLX's LP units. Below is a link to our letter to the Committee summarizing what an appropriate price for the SHLX units would be when using widely accepted measures of enterprise valuation. The analysis establishes that SHLX is worth in excess of $20 a share using any reasonable set of assumptions. We believe that Shell plc is exploiting the poor governance structure in place under the partnership agreement in order to accomplish a deeply discounted "takeunder" of SHLX that it would otherwise be unable to accomplish if SHLX were a Delaware C-Corp. It is particularly troubling that the partnership agreement releases the board of SHLX's from its fiduciary duties of care and loyalty, and waives conflicts of interest, including those for the so-called "Conflicts Committee", which undermines the entire basis for the Committee's existence. As a matter of appropriate corporate governance policies, we find this to be the antithesis of "the G in ESG" and in direct contradiction to Shell plc's public commitment to adhering to ESG policies. 

Moreover, a substantial component of MLP unit holders are retail investors, especially retirees, who require the enhanced yield and stability provided by publicly traded MLPs. These investors lack the sophistication and resources to advocate for their interests. Exploiting unsophisticated retail investors and retirees is clearly not consistent with the values of social responsibility (the "S" in ESG), and it would behoove the Committee to consider these factors, as well as its duty of good faith and fair dealing, which cannot be waived. At the current offer of $12.89 per share, we do not see how the Committee can discharge that duty and recommend accepting the current offer on behalf of the minority shareholders when SHLX's value is dramatically higher. 

Shell's position may or may not be vindicated in court if challenged. But if Shell truly believes in its own ESG policy, it must pay the fair price that SHLX unit holders deserve. Otherwise, Shell's commitment to Social Responsibility and good Governance is a fiction.

Wolf Capital Management encourages investors in Shell Midstream to contact the Conflicts Committee with their concerns and oppose any purchase by Shell PLC or any other party that seeks to acquire Shell Midstream below its intrinsic value. 

Letter to Conflicts Committee



Joshua Nahas
Wolf Capital Management, LLC

Source: Wolf Capital Management, LLC


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Tags: buyout, Shell Midstream Partners, Shell plc