Unilever: marred mate
Anglo-Saxon capitalism, like Marmite, is not to everyone’s taste
Unilever is unfriending the UK. The Anglo-Dutch consumer products group is dropping the first third of its identifier by incorporating solely in Rotterdam. Its UK-listed shares are likely to fall out of FTSE Russell UK indices. Some UK-focused funds would then need to jettison them too.
The move, heralded in a prospectus on Tuesday, is unlikely to damage UK sales of Unilever products, such as Marmite. It has left a bitter taste in some British mouths, all the same. Critics who discern ulterior motives behind the simplification may be right. Unilever’s reasons for preferring the Netherlands do not all stack up.
The case for ditching dual nationality is robust enough. It reduces complexity and saves money. It makes Unilever stock a cleaner currency for dealmaking. Most border-straddling multinationals have already switched. RELX, the data group once known as Reed Elsevier, became unequivocally British on Monday, for example.
A streamlined future comes at the cost of short-term hassles. Unification may, for example, force Unilever to make a mandatory bid for an Indian subsidiary. This should not be a deal breaker, any more than complaints from UK-focused funds.
Investors should certainly question Unilever’s assertion that a more liquid stock pool is a factor in the favour of the Netherlands. Unilever NV has a market capitalisation of €71bn, compared with €57bn for Unilever Plc. But the Dutch business owns 55 per cent of group assets, so this is hardly surprising.
Moreover, Fidessa data shows the bulk of trading in Unilever shares is in London. Almost all Plc stock changes hands there. For Unilever NV, it is some 30 per cent.
Unilever disputes the claim it is turning fully Dutch to make takeovers harder. It has promised to eschew the poison pills Dutch regulation permits. This is beside the point. Chief executive Paul Polman appeared rattled by a tentative takeover approach from Kraft Heinz of the US last year. The communitarian Netherlands looks like a cosier berth for his socially conscious business than the profit-hungry UK. Anglo-Saxon capitalism, like Marmite, is not to everyone’s taste.
A revolt by niche UK funds is unlikely to derail the simplification. They might more usefully invest in RELX. Its shares have outperformed Unilever long term and its margins are a lot fatter.