Unilever to combine Anglo-Dutch arms in UK company

Unilever is to abandon its dual Anglo-Dutch corporate structure in favour of a single company in London, reversing attempts two years ago to combine its two arms in the Netherlands.

The maker of Marmite, Dove soap and Ben & Jerry’s ice cream said on Thursday it would merge its Dutch entity into its UK arm, Unilever plc, later this year if the move is approved by shareholders.

The structure is a legacy of Unilever’s formation from the merger of a Dutch margarine company and British soap maker Lever Brothers more than 90 years ago. 

The consumer goods group said the shift would make equity-based acquisitions or demergers easier, including a potential spin-off of its tea division.

“Such flexibility is even more important as we anticipate the increasingly dynamic business environment that the Covid-19 pandemic will create,” it said.

The shift also raises the possibility of a split of the group’s food arm from its beauty & personal care and food divisions. Unilever said the Dutch government had asked for an assurance that any future spin-off of the foods and refreshment division would result in a Dutch-based and listed company.

Unilever said it was happy to make such an assurance provided the Netherlands continued to be “an attractive headquarter location for business”.

The company said it expected to retain its listing in both the FTSE 100 and Dutch AEX indices and would remain listed on exchanges in London, Amsterdam and New York. It said operations in both the UK and Netherlands would remain the same.

A plan two years ago to merge the UK into the Dutch entity, pushed by former chief executive Paul Polman, was scrapped after shareholder opposition, in part because it would have dropped out of the FTSE 100 after abandoning its London listing.

Shareholders in the current Dutch entity will own about 55 per cent of the new company, with those already owning UK shares accounting for about 45 per cent.

Nils Andersen, Unilever chairman, said: “Unilever’s board believes that unifying the company’s legal structure will create greater strategic flexibility, remove complexity and further improve governance.”

Martin Deboo, analyst at Jefferies, said: “The immediate issue is whether NV shareholders will have the same objections to the proposal as PLC ones did in 2018, something a retained AEX listing might mitigate.”

He added that the shift “is more than just a legal change — it signals something about the direction of the company”.

“It would suggest to me that they are serious about evolving the portfolio. We have long been arguing for a split of the business to unlock some value — it’s refreshing to see they are thinking creatively and radically about this,” he said.

The Dutch government had been urging Unilever to seek a single listing in the Netherlands after Brexit. 

Eric Wiebes, the Netherlands minister for economic affairs, said Unilever informed the Dutch government of its intention to become a British company in mid-May. Mr Wiebes said he “regretted” the decision and said the government had been in “intensive dialogue” to save Unilever’s Dutch operations. 

In a letter to parliament, Mr Wiebes wrote the move would not result in any job losses in the Netherlands. The Dutch government would also set up an advisory group to discuss ways to strengthen Unilever’s presence in the country, said the letter. 

The Dutch government tried to woo Unilever into a single listing in the Netherlands by scrapping a dividend tax on big corporates. But the tax break was ditched after a public backlash in 2018. 

Mark Rutte, Dutch prime minister and former Unilever executive, had argued the tax break would make the Netherlands a more attractive destination for international business. 

Shares in the Dutch entity were up 3.1 per cent to €48.63 in early trading, while the UK-based shares rose 0.95 per cent to £44.19.

Unilever’s largest division is beauty and personal care, which accounted for €5.6bn of turnover in the fourth quarter of 2019, followed by the Dutch-based food division, with €4.3bn, and home care with €2.7bn.

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