Formed of the merger of UK food producer Lever Brothers and Dutch margarine maker Unie in 1930, it has continued to acquire branded food and personal care brands over the years, from Hellman’s mayonnaise to Ben and Jerry’s ice cream, and most recently Dollar Shave Club for $1bn last year. These origins – and Unilever’s current stock market status – reveal another irony: with a London and Amsterdam listing, a major stake in India’s Hindustan Unilever, and operations all over the world, it is more international than national these days. Of its 168,000 employees worldwide, only 7,500 are in the UK. And while the UK business is large, generating annual sales of around €2bn, giants such as L’Oréal and P&G are similarly sizeable in UK personal care, while in UK packaged food, Mars and Mondelez International of the US are bigger.
Of course, Mondelez’s dominance did indeed come about through the controversial takeover of Cadbury by Kraft, before it then split into two. There were similar calls at the time for greater protection for UK companies, which have led to target-friendly reforms of takeover rules. But part of the UK’s appeal as a place to conduct the business of finance is its openness to overseas money; indeed, fewer than half of Unilever’s shares are owned by UK shareholders, and at a time when many are concerned about protectionism, it would be odd to crank it up in a market that thrives on being open for business.
The distinction I assume Unilever would like the government to make is that big companies should be afforded greater protection than the smaller ones it likes to buy. It argues that while bidders have plenty of time to build their acquisition strategies behind closed doors, targets do not have time to build a defence, and must do so in full public view. Technically, there is truth in this, but it seems an odd argument to make when the shoe is more frequently on the other foot – and international money has helped it strengthen its foothold.
It is also possible to argue that companies that do not want to be bought should always be building their defences, by giving their shareholders the confidence that they will continue to be run in such a way that the long-term returns from independence outweigh the one-off payday of selling out – as Unilever is now trying to do to fend off further approaches. With a flurry of M&A activity crossing their paths right now, it is a question shareholders may be asking themselves quite a lot in the days ahead.
