Unilever U-turn over plan to move HQ piles pressure on bosses

Pic:Consumer goods firm Unilever has abandoned plans to move its legal headquarters from London to Rotterdam ( PA )
Business correspondent(wp/es):

The future of Unilever’s board was in doubt on Friday after a shareholder rebellion forced the consumer goods giant into a “humiliating” climbdown from plans to move its HQ to the Netherlands.

The decision to abandon shifting its legal head office to Rotterdam and switching from two classes of shares to one comes six months after it unveiled the plans and just weeks before investors in Unilever’s Dutch and UK entities were due to vote on them.

The Marmite and Dove soapmaker, led by chairman Marijn Dekkers and chief executive Paul Polman who is eyeing retirement, is understood to have seen the extent of opposition and realised its plans could be rejected.

“This is somewhat humiliating — at least humbling — for Polman, and may accelerate his retirement,” said Investec analyst Eddy Hargreaves.

Shareholders have been coming out almost daily over the past few weeks to oppose the ideas, concerned that exiting the FTSE 100 will mean the stock is less likely to be included in UK managers’ portfolios.

Attacks on Unilever are a long way from the City praise heaped on the consumer goods company after it last year fought off a £115 billion takeover from US foods behemoth Kraft Heinz.

It had wanted to move to the Netherlands, where Dutch laws typically favour the defender in takeover attempts, to simplify its corporate structure.

Unilever has previously said it “engaged extensively” with shareholders and “we believe the vast majority are fully supportive of the board’s proposals”. The board today said it will consider its “next steps”.

Corporate brokers UBS and Deutsche Bank, tasked with keeping Unilever up to speed on shareholder thinking, advised Unilever on the relocation plan. Both declined to comment.

Shareholders with around 11% of the UK-listed shares had opposed the plan, and many investors welcomed today’s U-turn.

Iain Richards from Columbia Threadneedle said: “Better approaches are possible and the problems for shareholders were foreseeable.” Aviva Investors’ Mirza Baig said it was “in the best interests” of its UK shareholders and UK plc. M&G Investment said it proved shareholder engagement paid off.  

The controversy could trigger a widespread review, said Rachel Reeves, chair of the Business, Energy and Industrial Strategy committee. “Whatever the arguments made for incorporating into the Netherlands, there was a real suspicion that, in the wake of the hostile bid from Kraft Heinz, part of the motive for the move was that UK rules too easily allow takeovers,” she said. 

“As a committee, we will want to consider looking at the Government’s White Paper on foreign takeovers to see whether the new regime should include additional safeguards.”

UBS analysts said: “We believe the market’s focus will now shift to the next steps, corporate governance improvements under the current structure and the operational performance.”