Unilever leaves Britain

Consumer-goods giant Unilever has chosen Rotterdam over London for its unified headquarters. Takeover threats and taxes played a part. Alice Gråhns reports.

888_MW_P06_Shares_Main

PM Mark Rutte helped Unilever to go Dutch

2017 Getty Images

The consumer-goods giant has chosen Rotterdam over London for its unified headquarters. Takeover threats and taxes played a part. Alice Grhns reports.

"Britain's third-biggest company has confirmed Europe's worst kept corporate secret," says Matthew Vincent in the Financial Times. Consumer-goods giant Unilever, the maker of Dove soap and Hellman's mayonnaise, has announced that its two separate holding companies, one Dutch, one British, will become a single group incorporated in the Netherlands. It has chosen Rotterdam over London as the location for its new unified headquarters.

Why did the 130-year-old company make a choice in the first place? It got a nasty fright last spring when US firm Kraft Heinz launched a hostile $143bn takeover bid, says Stephen Wilmot in The Wall Street Journal. While the bid failed, the "trauma of becoming a... target" prompted a major strategic review, which ultimately convinced Unilever's management that "it needed flexibility to shake up its portfolio of consumer brands".

Facilitating acquisitions of other firms and fending off predators are crucial in this regard. Unilever's decision "to go Dutch is about giving itself advantages in mergers and acquisitions, whether bidder or target", say Andrea Felsted and Chris Hughes on Bloomberg Gadfly. Now, any future approach for Unilever would come under the jurisdiction of Dutch takeover rules rather than those of the UK Takeover Panel.The Netherlands regime allows potential targets to take more drastic action to frustrate bidders.

It's not about Brexit honest

Becoming a single legal entity also makes it easier and more tax-efficient for Unilever to use its shares as currency in a major acquisition. Having a single set of shareholders also makes demergers less of a hassle. Unilever will now be able to scoop up Este Lauder or Colgate-Palmolive in the US, for instance, and ditch its food business: "bulking up in the faster-growing personal-care business and offloading"slow-growing food would help pre-empt another hostile bid from Kraft. A revamp of the firm into three divisions, beauty, home care and foods, further emphasises that the move is all about streamlining and strategy.

Unilever denies the move has anything to do with Brexit and will "retain a big presence in Britain", says Carol Ryan on Breakingviews. Its 7,300 UK-based employees will keep their jobs and the two fastest-growing divisions, representing 60% of revenue, will be run from London. Still, it's a setback for Theresa May "as she grapples with the fallout from Brexit, and a victory for her Dutch counterpart Mark Rutte. The former Unilever employee helped swing the decision by scrapping a Dutch dividend withholding tax that penalised overseas investors". Unilever will remain listed in London, but seems unlikely to stay in the FTSE 100 index. Shareholders in Unilever's Dutch and UK entities get to vote on the plan. Three-quarters of the latter will need to back it, but overall the rejig "should be good for investors".

Recommended

Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021
Two outstandingly cheap UK stocks in an age of mad valuations
UK stockmarkets

Two outstandingly cheap UK stocks in an age of mad valuations

In these times of nutty company valuations, there is still plenty of opportunity around, says Merryn Somerset Webb. Take these two stocks, for example…
26 Nov 2021
What would another lockdown mean for markets?
Stockmarkets

What would another lockdown mean for markets?

A nasty new strain of Covid-19 has already sent markets tumbling, with the threat of further lockdowns now in the air. John Stepek looks at what that …
26 Nov 2021
Four of the best digital healthcare stocks to buy now
Share tips

Four of the best digital healthcare stocks to buy now

Thanks to Covid-19, policymakers and investors have become more aware of the wide array of opportunities in the sector. The good news is that we are a…
26 Nov 2021

Most Popular

Don’t worry about the global population explosion – it’s unlikely to happen
Investment strategy

Don’t worry about the global population explosion – it’s unlikely to happen

One of the many things we are taught to worry about is the fast-rising global population. But in fact, says Merryn Somerset Webb, the opposite is tru…
15 Nov 2021
Four of the best new investment trust listings
Investment trusts

Four of the best new investment trust listings

Diversify your portfolio and benefit from rising dividends with these four new investment trusts coming to the market soon.
15 Nov 2021
Is it time to remortgage your home?
Mortgages

Is it time to remortgage your home?

Banks are already starting to prepare for higher interest rates, says Alex Rankine. Should you, too?
23 Nov 2021