Unilever to Consolidate as U.K. Entity -- WSJ
12 Juni 2020 - 09:02AM
Dow Jones News
Food maker calls dual British-Dutch structure outdated as it
seeks to adapt to pandemic
By Saabira Chaudhuri
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 12, 2020).
LONDON -- Unilever PLC said it would consolidate its dual
British and Dutch corporate structure into a single company based
in the U.K., a move it hopes will allow it to more nimbly navigate
the challenges posed by the Covid-19 pandemic.
Less than two years ago, Unilever, the maker of Hellmann's
mayonnaise and Dove soap, abandoned a similar restructuring, aimed
at merging its two, separately listed British and Dutch operating
companies. At the time, Unilever had proposed moving its
headquarters to Rotterdam.
British investors revolted because the company would lose its
listing on the FTSE 100, one of the world's most prestigious
stock-market indexes, forcing some shareholders to sell. The move
was also politically sensitive, coming as British politicians were
squabbling over the contours of their exit from the European
Union.
Unilever has long said a single structure would reduce
complexity and improve its agility, particularly in deal making. On
Thursday, it said that is even more important amid the current
pandemic and its aftermath.
"We believe now is the right time to push ahead with these plans
as we prepare for, frankly, what's going to be an increasingly
dynamic business environment that this Covid-19 will create," said
Chief Executive Alan Jope on a call with reporters.
The company, which is trying to sell or spin off its tea arm --
the world's largest, with brands like Lipton and PG Tips -- said
having a single structure would allow it to do more deals. Unilever
has said in the past that its dual share structure made
transactions more complex and a single listing would allow it, for
instance, to more easily publicly list its tea business as a
stand-alone entity.
Unilever's move is the latest in a series of big strategic and
structural shifts by companies as they map out the longer-term
consequences of the pandemic. Starbucks Corp. is closing some
traditional cafes and opening more to-go locations. Zara owner
Inditex SA is closing hundreds of stores and accelerating its shift
to online shopping. Twitter Inc. last month said it would allow
employees to work from home permanently.
Unilever, one of the world's largest packaged-goods and
packaged-food makers, has found itself in the middle of a large
shift in consumer behavior amid global lockdowns aimed at slowing
the spread of the disease. Cleaning products and trusted
packaged-food brands have benefited.
Food products for restaurants and some personal care products
have suffered. As Unilever's biggest markets start to emerge from
confinement, it is unclear how permanent those shifts will be,
increasing a need for flexibility.
The current structure has been in place since Lever Bros., an
English soap maker, and Margarine Unie, a Dutch margarine producer,
agreed to join forces in 1929. The structure has evolved since
then, but the company continues to operate like separate legal
entities fused under a group-wide set of senior managers and
directors. Unilever's current head offices are split between London
and Rotterdam in the Netherlands.
In 2017, Unilever justified a move to Rotterdam by saying the
Dutch entity was bigger and its shares traded with greater
liquidity. Critics of Brexit pointed to the proposed move as a sign
companies were abandoning London amid messy political squabbling in
London over the terms of its departure from Europe. Unilever said
the move wasn't related to Brexit.
This time, the company plans to consolidate the company in the
U.K. "This is our best practical option," said Unilever Chairman
Nils Andersen on Thursday. "It was the FTSE index that was the
problem last time."
Unilever said little would change in practice. It said the
operations, locations, activities and staffing levels in both
countries wouldn't be impacted by unification nor would the
production and supply of products.
Unilever expects to remain listed on the AEX, an index of Dutch
companies that trade on Euronext Amsterdam. Dutch shareholders will
receive one new Unilever share in exchange for each share of the
Dutch unit, Unilever NV.
The company will need shareholder approval and is hoping to
finish the deal by year-end. It is unclear whether Dutch investors
will object in the same way that British shareholders did in
2017.
The company said it hasn't yet done canvassing of shareholders.
It said 50% of Dutch shareholders and 75% of U.K. shareholders
would need to agree.
Mr. Andersen said the move doesn't signal that Unilever is
planning any big acquisitions or spinoffs in the short-term. "This
is about being ready for things that occur in the future," he said.
"This has been needed for at least 40 years because the structure
of the company is outdated and not competitive."
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
June 12, 2020 02:47 ET (06:47 GMT)
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