Unilever Picks Rotterdam Over London for Headquarters -- 2nd Update
March 15 2018 - 4:46AM
Dow Jones News
By Saabira Chaudhuri and Costas Paris
LONDON -- Unilever PLC has decided to consolidate its dual
headquarters in Rotterdam over London, an emotionally charged move
that came despite last-minute lobbying from the British
government.
In a Wednesday board meeting, directors decided on the Dutch
city but Unilever's board was still receiving calls from the U.K.
government on Wednesday night, according to a person familiar with
the matter.
The company's announcement early Thursday came alongside details
of a broader restructuring of its operations into three divisions
with separate headquarters. Beauty and personal care, as well as a
home care unit, will be based in London, while its foods and
refreshment division will continue to be based in Rotterdam.
The maker of Dove soap and Ben & Jerry's ice cream said the
7,300 people it employs in the U.K. and the 3,100 people in the
Netherlands won't be affected by the changes.
RBC analyst James Edwardes Jones said Unilever's announcement
isn't a big deal for investors. "The decision over the location of
Unilever's base is certainly politically charged, but in our view
has little relevance from an investors or share price perspective,"
he said.
Unilever said the simplified structure will give it more
flexibility to make portfolio changes and help long-term
performance.
The news on its legal base confirms a Wall Street Journal
article Wednesday that said the company's board had decided on the
Dutch city.
Critics of Unilever's current structure have complained it is
unwieldy and can interfere with deal making -- including by
hindering the company's ability to use stock to make big
acquisitions. The shares of the two operating companies, Unilever
PLC and Unilever NV, aren't convertible and the value of a single
share in each company must remain equal. That makes it tough to
issue new stock to fund a deal.
The decision wasn't easy. Unilever had for months wrangled with
the question of where to situate the combined company. The maker of
consumer products such as Magnum ice creams and Hellmann's
mayonnaise currently splits its headquarters between London and
Rotterdam. That is a legacy of its dual structure, which
essentially consists of two separate British and Dutch operating
companies, each with its own shares.
Following an unsolicited takeover approach by Kraft Heinz Co.
early last year, Unilever launched its review of that structure and
determined that unification was in the best interests of the
company and shareholders. The big question ever since has been
whether Unilever would select London or Rotterdam to base a
combined entity.
Unilever said Thursday its decision reflected the fact that
shares in the Netherlands entity made up about 55% of the combined
ordinary shares for the group and that these trade with greater
liquidity than shares in the U.K. entity.
The decision has taken on great significance in the U.K., which
is in the process of negotiating its exit from the European Union.
Critics of that move -- triggered by a 2016 referendum -- have
warned the split from the EU could force some big companies to move
to mainland Europe to remain part of its common market and to
continue to take advantage of the free movement of labor across the
bloc, among other issues.
On Thursday, Unilever said it plans to continue to spend nearly
GBP1 billion annually in the U.K. including on research and
development.
In response, a U.K. government spokesman said the company had
shown its long-term commitment to the country by locating what the
government called its two fastest-growing divisions in the U.K.,
safeguarding jobs and investment.
"As the company itself has made clear, its decision to transfer
a small number of jobs to a corporate HQ in the Netherlands is part
of a long-term restructuring of the company and is not connected to
the U.K.'s departure from the EU," the government spokesman
added.
Unilever's 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.
The company plans to maintain listings in the Netherlands, the
U.K. and the U.S. and will remain subject to British and Dutch
corporate governance codes. It is currently unclear whether it will
remain listed on the FTSE 100.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and
Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
March 15, 2018 04:31 ET (08:31 GMT)
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