It’s no secret that Paul Polman, chief executive of Unilever (ULVR), is not a fan of Britain leaving the EU. What he is now trying to make equally clear is that Brexit was not a factor in the consumer goods giant’s move to drop its dual-headed legal structure in favour of a single headquarters in the Netherlands. While the decision is no doubt a disappointment to UK authorities, from a corporate finance perspective the Rotterdam decision makes complete sense.
Unilever will still be listed in London, Amsterdam and New York, but as a legal entity it will be based in Rotterdam only. All Dutch preference shares have been cancelled and those remaining will for the first time follow a 'one share, one vote' principle.
The maker of Marmite will still follow both UK and Dutch corporate governance codes. The latter of the two may prove particularly important. The Rotterdam headquarters means that Unilever will fall under the Dutch takeover code, which prevents hostile takeovers. This will make it that much harder should Warren Buffett – via Kraft Heinz – revisit approaching the group.
It’s not all bad news for the UK. Unilever has been divided into three parts – foods and refreshment, beauty and personal care, and homecare. The latter two will remain in the UK, meaning around £1bn will continue to be spent per year in the UK on things such as research and development. That means individual business units will have more autonomy over strategic decisions, such as spending and acquisitions.
What’s still unclear is whether it will lose its spot in the FTSE 100, which would mean fewer index-tracking funds would be invested. Analysts at Jefferies said management’s revelation that listing authorities had not been consulted on the change for confidentiality reasons “inspired controversy”.
