Unilever Picks Rotterdam Over London for Headquarters -- WSJ
March 16 2018 - 3:02AM
Dow Jones News
By Saabira Chaudhuri and Costas Paris
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 16, 2018).
LONDON -- Unilever PLC will consolidate its dual headquarters in
Rotterdam instead of London, a politically charged decision that
came despite last-minute lobbying from the British government.
The decision, pending for months, has taken on outsize
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.
Rajesh Agrawal, London's deputy mayor for business, described
the move as "clearly disappointing news for the capital."
Unilever, the maker of Magnum ice cream and Hellmann's
mayonnaise, said Thursday the move wasn't based on Brexit concerns,
and that it wouldn't significantly affect jobs, taxes or investment
plans. The company said the decision may cost it its place in
Britain's blue-chip index, the FTSE 100, of which it is the
14th-largest component.
Unilever's announcement came alongside details of a broader
restructuring of its operations into three divisions with separate
headquarters that will shrink its corporate center and give its
businesses more dedicated resources. Its beauty and personal-care
business, as well as its home-care unit, will be based in London.
Its foods and refreshment division will continue to be based in
Rotterdam.
The Wall Street Journal previously reported the company's board
had decided on the Dutch city. The change is expected to be
completed by the end of the year.
Unilever had for months wrangled with the question of where to
situate a combined company after deciding it would unify its dual
British-Dutch legal structure, which essentially consists of two
separate British and Dutch operating companies, each with its own
shares. It currently splits its headquarters between London and
Rotterdam.
Unilever's finance chief, Graeme Pitkethly, said Thursday the
decision hinged on 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.
Unilever Chairman Marijn Dekkers said the decision was a complex
one, and that executives and directors had to consider a number of
knock-on ramifications. "The unraveling of the situation is
enormously complex; all of that needs to be planned out," said Mr.
Dekkers.
According to a person familiar with the matter, Unilever took
into account issues related to Brexit, as well as a concerted charm
offensive by Dutch Prime Minister Mark Rutte, a former Unilever
executive. Mr. Rutte successfully campaigned to scrap a Dutch
dividend withholding tax, making the Netherlands more attractive to
Unilever than it would otherwise have been.
"There were dissenting voices" over the Rotterdam decision, "but
no convincing cases for a stay," this person said.
British government officials were talking to Unilever throughout
the process, but toward the end those talks centered on containing
job losses and choreographing statements that could minimize any
reputational damage to London, according to the person familiar
with the matter.
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 Britain,
safeguarding jobs and investment. The company said Thursday it
plans to continue to spend nearly GBP1 billion ($1.4 billion)
annually in the U.K. including on research and development. 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.
Following an unsolicited takeover approach by Kraft Heinz Co.
early last year, Unilever launched a review of its dual structure
and determined that unification was in the best interests of the
company and shareholders. It had previously said the simplified
structure will give it more flexibility to make portfolio changes
and help long-term performance. It expects to make the change by
the end of the year.
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.
Unilever's Mr. Pitkethly, in an interview, said the company's
approach to acquisitions won't change following its move to
simplify its structure. The company has in recent years favored
small to midsize deals. But the new structure gives Unilever the
"strategic flexibility to act should the opportunity arise," he
added.
Unilever 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. Whether it will remain a component of
the FTSE 100 is still an open question, said Mr. Pitkethly. He said
that current practice wouldn't allow Unilever to keep its place.
The London Stock Exchange didn't respond to a request for
comment.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and
Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
March 16, 2018 02:47 ET (06:47 GMT)
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