Unilever (ULVR) has bowed to pressure from institutional investors and scrapped its plans to do away with its dual-headed legal structure in favour of a Netherlands headquarters. The consumer goods giant will continue to be listed in London and in Rotterdam, with headquarters in both. The company stated that it has received “widespread support” for its plans to simplify its legal structure, but that the proposal had not received support from a “significant group of shareholders”.
A number of institutional investors including M&G Investments, Legal & General Investment Management, Schroders, Aviva Investors, and Columbia Threadneedle had all opposed the plan. The simplified legal structure meant that Unilever would have fallen out of the FTSE 100 index, although it would have maintained a premium London listing. This would have forced funds tracking that index and some active managers to sell their shares. Rupert Krefting, head of corporate governance and stewardship at M&G, said the ordeal “demonstrates the value of asset managers actively engaging with their investee companies”.
Chairman Marijn Dekkers said that the board still believes that a simplified structure would create value over time and “serve the best long-term interests of Unilever”. Preference shares listed in the Netherlands, which account for around 1 per cent of outstanding Dutch shares but represent 20 per cent of the voting rights, will still be cancelled.
Analysts at UBS view the cancellation of the Dutch preference shares as a “positive step forward” for Unilever’s corporate governance, but said the simplified structure would have had a positive impact on the company’s valuation. Considering the board's belief that a unified structure is in the best interests of the company, UBS analysts expect Unilever to assess other options and come up with a new proposal in the future.
One of the motivators behind the single legal entity was that Unilever would then fall solely under the Dutch takeover code, which prevents hostile takeovers. This could be particularly important if Warren Buffet via Kraft Heinz decides to make another attempt to acquire the Anglo-Dutch group after its failed attempt in February 2017.
