Unilever makes a U-turn
The need to get deals done and raise fresh equity is driving the move
Hungry for deals, Unilever pivots to London
British business minister Alok Sharma got a bit of good news on Thursday morning. Consumer goods group Unilever revealed plans to become a single company based in London after almost a century of operating under a dual Anglo-Dutch corporate structure.
“A clear vote of confidence in the UK,” he wrote on Twitter. Is it though? DD would like to take Sharma back to 2018 when Unilever said it would simplify its dual stock market listing and consolidate its headquarters in . . . Rotterdam.
Saying Unilever chose London is a bit like asking for chocolate ice cream and being told it has run out but there’s vanilla instead. It’s not the preferred choice but it’s the only other feasible one.
Unilever’s move to Rotterdam largely fell apart because of a colossal miscalculation by the company’s leadership at the time. DD ran through the whole saga here.
The problem was that Britain had just two years previously voted to leave the EU. Making shareholders choose between the Netherlands and the UK was bound to stir up nationalist sentiments.
Perhaps then-chief executive Paul Polman was feeling extra confident having survived the “near-death experience” of a takeover from 3G Capital-backed Kraft Heinz. But things didn’t go to plan. UK shareholders were overwhelmingly against the idea. Some were shocked that it had even been entertained given that it would mean Unilever would have to abandon its London listing.
Back to Thursday: Polman’s successor Alan Jope has decided to go the other way. Shareholders will of course have to approve the fresh plan to scrap the dual structure as well.
FT’s Lex thinks there is more chance of success. Under the new plan the company will remain listed on both the FTSE and Dutch AEX indices. And Unilever needs only 50 per cent of Dutch shareholders to approve the move, while 75 per cent of UK shareholders had to vote in favour of going to Rotterdam.
You might find yourself asking why Unilever bosses are so eager to consolidate its Anglo-Dutch corporate structure. The answer is simple: it’s much easier to get deals done, pursue demergers, and raise fresh equity.
Unilever chairman Nils Andersen indicated that the company was expecting a lot of opportunities post-pandemic so it’s easy to see why it wants to get it done now.
The company currently has two equity structures, or TopCos, so anything that requires shareholder approval (like the move itself) has to be voted on by Dutch and UK shareholders. Private equity group KKR, which agreed a €6.8bn deal to buy Unilever’s spreads business in 2017, can tell you that it doesn’t make for a very efficient system.
If Unilever is going to streamline its operations, this is a necessary move. The old structure is a relic from a long-ago merger. It’s time for a new structure and new deals.
What’s to follow once Unilever pushes this simplification through? Big M&A. Go deeper.