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Unilever – should I stay or should I go?

In 2017, the multinational food and personal goods company Unilever had an unwelcome and unsolicited takeover approach from the US listed company Kraft Heinz, controlled by private equity group 3G Capital and Warren Buffet’s company Berkshire Hathaway. However, this approach did not result in any formal offer being made due to Warren Buffett’s dislike of hostile acquisitions. Subsequently, the Unilever Board decided to review its ‘dual listed’ structure as Unilever presently has one management team but two companies, with headquarters in both Rotterdam and London and two separately listed entities, a UK plc and a Dutch NV.

In March, Unilever announced that it had selected the Netherlands over the UK as its single legal base, saying that its choice reflected the fact that the Dutch NV represents 55% of the group’s overall share capital and that the shares listed in the Netherlands are more liquid. Unilever also argued that it needed the greater flexibility that moving to one share class would bring, making it easier to issue shares, make large acquisitions and demerge businesses. In June, Unilever confirmed that this decision meant that it was unlikely to stay within the FTSE 100 index following this move. However, some of the largest institutional shareholders have publicly said they are unhappy about Unilever’s likely exclusion from the FTSE 100 index, urging Unilever to reconsider its plans.

In July, Unilever confirmed that shareholders will be asked to vote on the move in meetings to be held on 25 and 26 October. It requires 75% of UK shareholders and 50% of NV shareholders to vote in favour of simplification for the measure to be adopted.

Given that Unilever is a global company with a proven track record of growth, we have no strong objections to choosing one location over another so long as clients can continue to own the shares and to trade them easily on a well-recognised stock exchange. We believe that management should be trusted to have explored all angles surrounding the decision and will have opted for the best outcome for all shareholders. Hence, in line with Speirs & Jeffrey’s usual approach, we will not be seeking to vote clients’ shares as we believe there is no compelling reason for us to vote either for or against this move. However, if you take a different stance and wish us to vote on your behalf, then please contact your relevant investment manager to discuss further.

14 September 2018