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20th of July 2018


Unilever shareholders warn on HQ move to Netherlands

One of Unilever’s biggest shareholders has warned of the forced selling of the consumer group’s shares as unrest grows among British investors over the decision to move its headquarters to the Netherlands.

Unilever has embarked on a charm offensive among its UK shareholders, which have been alarmed by the likely ejection of the company from the FTSE 100 index that many use as a benchmark. The company has attempted to woo investors through a series of meetings ahead of a crucial vote on abandoning the company’s 89-year-old Anglo-Dutch structure.

Nick Train, joint founder of Lindsell Train, a top-five shareholder with a 2.5 per cent Unilever stake, urged holders of Unilever’s UK-listed stock to “give serious consideration over the summer as to whether the proposal is in their interest”.

His comments to the Financial Times highlight the tough battle Unilever faces in garnering the required 75 per cent of UK shareholders to vote in favour of the move, alongside 50 per cent of Dutch shareholders. Unilever will seek a premium London listing but is expected to fail index compiler FTSE Russell’s liquidity criteria for FTSE 100 inclusion.

Mr Train, whose investments tend to be long-term, warned of possible “inconveniences and increased risks for our clients” linked to the move, including the “likelihood that we will become forced sellers of the shares for some of our clients at a time and a price not of our choosing”.

Three large shareholders said that the company had not given satisfactory responses to concerns during meetings. A top-10 shareholder, who has spoken with the board twice about the plans, said Unilever had been “almost belligerently unreceptive” to the concerns of British investors.

“They showed no intent to listen to shareholders — almost the opposite. I don’t see how they are confident that they will get it through [the vote passed]. I think they are in trouble.”

As UK shareholders, we don’t see the justification for supporting it nor do we accept it has been approached in the right way

“The vote is finely balanced. It’s not a slam dunk,” said Samuel Johar, of Buchanan Harvey, a board advisory firm, who has spoken to several large shareholders.

The vote on the move is due to take place before the end of September and investors are waiting for a circular with more details about how the process of simplifying the two sets of shares will work.

Unilever said: “Unilever will remain listed in London; and as we continue to engage extensively with our investors and shareholders, we remain very confident of the outcome of the vote on simplification.”

Graeme Pitkethly, Unilever’s finance director, said last month that the company was “extremely” unlikely to stay in the UK’s FTSE 100 index were it to become a Dutch NV company.

He acknowledged that ejection from the index — Unilever has a £123bn market value and the PLC is the ninth-largest in the FTSE 100 index — would have “negative implications for some investors that are benchmarked to it”. But he added that “simplification is the right thing for the company and our shareholders as a whole”.

Passively managed funds that use the FTSE 100 as their benchmark will be forced to sell their shares if the company is ejected from FTSE Russell UK indices, while actively managed funds could also be affected if they face restrictions on having large holdings in companies that are not in the index.

Some active fund managers also fear that the forced selling of stocks by passive fund managers could drive down the share price, hurting investment returns in the process.

A top-20 shareholder said there were also potential tax implications for UK investors if the company ditched its UK plc structure, which would leave investors with bigger costs.


Friday, 22 June, 2018

Iain Richards, head of governance and responsible investments at Columbia Threadneedle, a top-10 shareholder, said the vote would be “quite a test case”.

“We know Unilever is lobbying institutions very hard that they should ignore the impact on plc shareholders and think about wider interest. But we have obligations to our clients to consider the impact for our UK funds,” Mr Richards said.

“As UK shareholders, we don’t see the justification for supporting it nor do we accept it has been approached in the right way. The strategic logic of reorganising the business makes sense but the execution discriminates against UK shareholders and Unilever knows that.”

Mr Train said: “We have discussed [our] concerns with senior executives at Unilever and now await the publication of the formal documentation from the company, which we hope will offer mitigations for those inconveniences and increased risks.”

This article has been updated to clarify that Unilever is the ninth-largest company in the FTSE 100 index, rather than the fourth-largest as originally stated.

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