Consumer goods giant Unilever NV confirmed March 15 that it is ending its Anglo-Dutch status by unifying its corporate headquarters in Rotterdam, the Netherlands, part of a new corporate structure designed to give it more flexibility.
Unilever, which has head offices in London and Rotterdam and separate U.K. and Dutch share listings, Unilever PLC and Unilever NV, said in a statement that it would introduce a single holding company that would be incorporated and tax-resident in the Netherlands with one class of shares that it intends to be listed in London, Amsterdam and New York.
The decision was widely expected and comes at a time when the U.K. is negotiating its departure from the European Union, a process commonly referred to as Brexit. According to the Financial Times, Unilever CEO Paul Polman said Brexit was not a factor in the decision. "I can categorically say that it has nothing to do with Brexit," he was quoted as saying.
Unilever is not alone in changing an unwieldy dual structure. Business information and analytics provider RELX Group PLC, another product of an Anglo-Dutch merger, on Feb. 15 said it would establish a single corporate entity based in London.
Carmen Stoian, a lecturer in international business at the University of Kent Business School, said in an email that Unilever's dual-headed structure was "rare and has several limitations. Hence, the consolidation of its headquarters in Rotterdam makes business sense."
Unilever's move follows a yearlong review sparked by an unsolicited $143 billion takeover attempt by Kraft Heinz Co. in January 2017. The approach was thwarted but highlighted the constraints of Unilever's structure, including its ability to make changes to its portfolio through sales and acquisitions.
Unilever, the maker of Dove soaps, Magnum ice creams and Surf laundry detergents, said the proposed simplification will provide greater flexibility for strategic portfolio change and help drive long-term performance. It anticipated that the new structure, which requires shareholder approval, could be implemented toward the end of 2018.
"While we do not currently plan any major portfolio change, we believe it is appropriate to create a corporate structure that provides the group with the strategic flexibility and optionality to do so," the company said.
Unilever was formed in 1930 from the combination of the Netherlands' Margarine Unie and the U.K.'s Lever Brothers. Since then, the two companies have been governed by complex agreements to maintain parity between economic rights of the respective shareholders. Shares of the Dutch-listed entity represent 55% of the ordinary share capital of the group while the U.K. entity represents the remaining 45%. The Dutch shares trade with greater liquidity, Unilever said.
Under the terms of the proposal, shareholders of the two companies will share the same dividend and capital distribution interests in the new holding company and in the same relative proportions in the combined group as before.
The company said its strategy and its 2020 financial goals would be unchanged by the simplification of the corporate structure.
It expects its credit rating to be unaffected. All debt that benefits from a guarantee from the current Dutch and U.K. holding companies, or other group companies, will continue to benefit from such a covenant combined, in due course, with a guarantee provided by the new Dutch holding company. Unilever will continue to report its earnings and declare dividends in euros.
"The changes announced today also further strengthen Unilever's corporate governance, creating for the first time in our history a 'one share, one vote' principle for all our shareholders," Unilever Chairman Marijn Dekkers said in the statement.
In addition to the governance changes, Unilever said it would restructure its business into three divisions, effectively combining its food businesses and expanding personal care. Its new divisions — beauty and personal care, home care, and foods and refreshment — would be empowered with greater responsibility for making long-term strategic choices and managing financial performance, Unilever said.
Beauty and personal care and home care will be located in London, Unilever said, securing nearly £1 billion per year of continued spend in the U.K., including a significant commitment to research and development. Food and refreshment will continue to be based in Rotterdam.
Unilever said its 7,300 workers in the U.K. and 3,100 in the Netherlands would be unaffected by the changes.
In midmorning trading, Unilever's shares in London were down 44 pence, or 1.2%, at 3,776.50 pence, while its Amsterdam-listed stock traded down 50 cents, or 1.2%, at €42.92.
