Unilever to end Anglo-Dutch structure to prioritise London base after failed Amsterdam move
Unilever today announced plans to end its joint Anglo-Dutch structure to unify under its UK listing, after failing to persuade British investors to approve a shift to its Amsterdam HQ in 2018.
The consumer goods giant would swap Dutch shares for its London-listed Unilever PLC stock, with Unilever PLC becoming the single parent company it will unify under.
It comes over 18 months after the consumer goods behemoth failed to abolish its London headquarters and move its primary listing to the Netherlands amid huge investor opposition.
Keeping its listings in London, Amsterdam and New York, Unilever said unifying under one legal structure will make it easier to sell off its tea business. The business has sought to sell the unit, which includes PG Tips and Lipton, since launching a review of it in January.
“The ongoing strategic review of Unilever’s tea business has further demonstrated that the dual-headed legal structure can create disadvantages for the group,” the board said.
“[A sale] would be significantly more challenging under the current legal structure than under a single parent structure.”
The company added that the coronavirus crisis means unifying under Unilever PLC will give it more flexibility.
“The Covid-19 pandemic will create a business environment in which having as much flexibility and responsiveness as possible will be critically important,” the maker of brands including Cornetto and Lynx said.
While the company will maintain its international listings, it will only have one market capitalisation, one class of shares and one global liquidity pool.
Shareholders would have “an equal voting basis per share” for the first time and the firm added that the move would strip out complexity and enable it to tailor its portfolio through acquisitions or demergers.
The changes come after a review that took 18 months to conduct in the wake of its failed move to scrap its London HQ in favour of going Dutch.
It had needed 75 per cent of UK shareholders to approve the move, but pulled the vote in October 2018 as it looked set to lose spectacularly.
“This review has underlined how a simpler legal structure would give Unilever greater strategic flexibility to grow shareholder value, providing a catalyst for accelerated portfolio evolution and greater organisational autonomy,” the firm said.
The firm will remain in both the Netherlands and the UK, with no changes to “operations, locations, activities or staffing levels” in either base.
Nils Andersen, chairman, said: “Unilever’s board believes that unifying the company’s legal structure will create greater strategic flexibility, remove complexity and further improve governance.
“We remain committed to The Netherlands and the UK and there will be no change to Unilever’s footprint in either country as a result of the proposed change to Unilever’s legal parent structure. We are confident that unification will help Unilever deliver its vision of driving superior long-term performance through its multiple stakeholder business model.”
Will Dutch investors block Unilever’s London move?
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, called the move “a big departure from the failed plans of 2018”.
Back then, shareholders defeated Unilever’s plans for a single listing in Amsterdam. Lund-Yates said the same logic is driving the company’s new move, as it seeks to make disposals easier in order to sell off its tea business.
“Any move that contributes to Unilever becoming a more agile machine is a step in the right direction,” she added. “Particularly as coronavirus has accelerated the challenges being seen by a lot of the big brands.”
The company missed its sales target for 2019, it revealed in January, and profits dropped by a third before coronavirus struck. The pandemic also hit sales and forced it to withdraw financial forecasts.
While Unilever’s FTSE-listed shares rose 1.6 per cent to 1,448p on the announcement, Lund-Yates warned Netherlands shareholders could block the move – just as British shareholders did in 2018.
“From an investment perspective, holders in the Dutch line will be able to swap their shares for plc shares, on a one-for-one basis,” she said. “The London Stock Exchange is a more liquid environment, so on paper the move makes sense. But any challenge to the unification efforts will likely be more about sentiment than the numbers themselves.”