Unilever Backs Down on Dutch HQ Move After British Investor Revolt

October 5, 2018 Updated: October 5, 2018

LONDON—Unilever scrapped plans to move its headquarters to the Netherlands on Oct. 5, in the face of a shareholder revolt, keeping one of Britain’s most valuable companies in London ahead of Brexit.

The climbdown comes three weeks ahead of the planned vote on the proposal and is a victory for shareholders who opposed the move, which would have kicked the maker of Marmite, Dove soap and Ben & Jerry’s ice cream out of the benchmark FTSE 100 index.

“We are pleased they have abandoned the plan to ‘go Dutch’,” said GAM portfolio manager Ali Miremadi, who intended to vote against the move. “Now the company can put its focus into the core job – driving long-term shareholder value.”

Unilever’s board agreed to scrap the plan during a call early on Friday after it became clear it could fall short of the required votes, a source familiar with the matter said.

logo Unilever headquarters Rotterdam
The logo of Unilever is seen at the headquarters in Rotterdam, Netherlands, on Aug. 21, 2018. (Piroschka van de Wouw/Reuters)

The plan needed the backing of a majority of UK shareholders holding at least 75 percent of the shares, but only required approval from 50 percent of the Dutch-listed shares.

Shareholders representing about 12 percent of Unilever PLC had publicly opposed the move, concerned about the effective forced selling of their shares with no premium, uncertainty around the future tax treatment of Dutch dividends and a perception that the move was partly aimed at securing greater takeover protection under Dutch law.

Unilever’s U-turn comes at a sensitive time for the British government, which is battling to protect jobs and investment as Prime Minister Theresa May fights for her proposed divorce plan from the European Union.

“The UK is one of the best places in the world to grow a business, and our modern Industrial Strategy commits us to be an open and competitive economy and a great place to locate global headquarters,” Business Secretary Greg Clark said.

The decision is set to trigger political fallout for Dutch Prime Minister Mark Rutte over his unpopular proposal to scrap a withholding tax on dividends that was seen as helping to woo Unilever.

Deputy Finance Minister Menno Snel said the Dutch cabinet was meeting to discuss the consequences. “We would have liked to have seen this turn out differently,” he told reporters.

Forced Selling

Unilever’s exit from the FTSE would have forced funds mandated to track the index to sell their shares. That may have pressured the price for the remaining shareholders, some of whom worried that shares in the new Unilever would be less liquid.

Unilever decided to collapse its Anglo-Dutch structure following a review sparked by last year’s failed $143 billion takeover approach by Kraft-Heinz. The stated aim was to make it more efficient and agile in a consumer market rocked by e-commerce, social media and upstart rivals.

But on Friday Unilever said it recognized that the proposal had not received support from a significant group of shareholders and therefore withdrew it.

“The board will now consider its next steps and will continue to engage with our shareholders,” Chairman Marijn Dekkers said, adding Unilever will proceed with the plan to cancel its Dutch preference shares.

Earlier this week, influential proxy advisory firm PIRC recommended shareholders vote against the move.

Another service, IVIS, which is the corporate governance research service of the Investment Association, issued a “red top” recommendation on the move on Friday, its strongest level of concern.

Sources said Unilever probably knew that recommendation before it was made public, which could have signaled that further shareholder defections were likely.

What Next

Unilever’s Anglo-Dutch structure dates back to 1929 when British soap maker Lever Brothers combined with Dutch margarine company Margarine Unie. Unilever sold its margarine and spreads business earlier this year to KKR.

UBS analysts said the investor focus would now shift to Unilever’s next steps, corporate governance improvements under the current structure and its operational performance.

Unilever’s London-listed shares were down 1 percent at 0957 GMT, while its Dutch shares were down 0.2 percent.

“This change should not really affect the group’s near-term operation, although it may lead to a faster pace for CEO succession planning,” Liberum analyst Robert Waldschmidt said.

Waldschmidt said the bigger drivers for Unilever’s shares were U.S. interest rates and continued difficulties in emerging markets, particularly related to their currencies.

Avoiding uncertainty over the shape of Brexit is another benefit to Unilever putting off a change, analysts at Baader Helvea said.

“Given current political discussions (i.e. Brexit), delaying such a vote until better mid-term visibility exists looks a reasonable approach (by Unilever),” they said.

Unilever was advised by its corporate brokers, UBS and Deutsche Bank, and its legal adviser, Linklaters.

by Martinne Geller

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