Food maker calls dual British-Dutch structure outdated as it seeks to adapt to pandemic
By Saabira Chaudhuri
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 firstname.lastname@example.org