Consumer goods giant Unilever has scrapped a plan to relocate its headquarters outside of the UK after investors ramped up pressure on the company over recent weeks, and now faces scrutiny over the way it handled the proposed move.
The Anglo-Dutch firm, which owns several household brands such as Marmite and Dove, had intended to consolidate the group in the Netherlands, having reviewed its corporate structure after an attempted $143bn (£110bn) takeover by Kraft Heinz last year, as Dutch laws offer more comprehensive protection against hostile takeovers than the British system.
Unilever changed its plans after several shareholders raised objections to the proposed move, including Legal & General, Aviva and Royal London.
Business secretary welcomed the decision on Friday. “Keeping Unilever’s HQ in the UK builds on two of its three global businesses being based here. The UK is one of the best places in the world to grow a business,” he said.
AJ Bell investment director Russ Mould said Unilever’s climbdown was “an example of the power institutional investors can wield when they act in concert with one another”.
He pointed out that abandoning its dual UK-Dutch stock market listing and moving its HQ to Rotterdam would have made Unilever, Britain’s third largest company, ineligible for the FTSE, which led many investors to state that they would have been forced into selling their shares.
“The episode looks to have been badly mis-managed and the position of chief executive Paul Polman and the rest of the board is likely to come under severe scrutiny,” Mr Mould said.
“In principle the rationale behind Unilever’s proposals made sense, simplifying the share structure would, for example, have made it easier to use equity in takeover deals. However, whether the current management will be able to push through an alternative is open to question.
“Uprooting to Rotterdam also had clear political sensitivities given it was timed to take place before the UK’s looming exit from the EU, coincidental or not. The news will therefore be greeted with relief in Number 10 and some frustration in the Netherlands which had been looking to introduce tax changes to pave the way for Unilever’s move.”
Gavin Oldham, chairman of investment group The Share Centre, said he was “delighted” with Unilever’s decision, which “is in no small part due to the widespread opposition of personal shareowners, whose views were particularly important due to the “member count” vote”.
However, he added: “The company’s denial of shareholder rights cannot now be overlooked. I have therefore asked the London Stock Exchange and our trade association PIMFA [Personal Investment Management & Financial Advice Association] to seek clarification from the Confederation of British Industry that listed companies will in future be expected to comply with this vital part of company law, which provides shareholder rights to the huge number of nominee-based personal share owners in the United Kingdom.”
Shares in Unilever dropped by 1 per cent in early trading.
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