June 11, 2020 / 3:33 PM / a month ago

Breakingviews - Unilever’s reverse reunification is win for FTSE

The logo of the Unilever group is seen at the Miko factory in Saint-Dizier, France, May 4, 2016.

By Dasha Afanasieva and Peter Thal Larsen

LONDON (Reuters Breakingviews) - Unilever has bowed to the power of the FTSE 100 index. The consumer giant on Thursday unveiled a plan to unify its dual holding companies in London, less than two years after UK shareholders rejected an attempt to create a single Dutch parent. This attempt has a greater chance of success.

The $143 billion group has long wanted to ditch its Anglo-Dutch structure, which makes it harder to carve out unwanted businesses and almost impossible to pay for acquisitions by issuing stock. In 2018 former Chief Executive Paul Polman tried to fold the two holding companies into a single parent based in Rotterdam.

But some shareholders in London, which accounts for about 45% of the group’s market capitalisation, rebelled. The move would have ejected Unilever from the FTSE 100 index, which tracks companies whose primary listing is in London, forcing shareholders whose mandate is restricted to UK shares to sell. FTSE Russell, which administers the benchmark, rejected requests for an exemption.

New boss Alan Jope is now trying the same move in reverse by offering shareholders in the Amsterdam-listed unit an equivalent share in London-listed Unilever PLC. As the deal requires approval from just 50% of Dutch shareholders – compared with 75% in the United Kingdom – the bar for rebellion is higher.

Unilever insists it will not close offices or move jobs due to the merger. It’s still a snub for the Netherlands, though. Dutch Prime Minister Mark Rutte – a former Unilever executive – had promised to reform the country’s dividend taxes to lure the company. Though Unilever has pledged to list its foods and refreshment unit in Amsterdam if it is ever spun off, there are no plans to do so.

A simpler structure should make it easier for Jope to spin off Unilever’s tea business and accelerate other disposals or acquisitions. Meanwhile, shareholders who fretted that Unilever was seeking protection from possible hostile takeovers or activist investors in the Netherlands will be reassured that the company remains bound by London’s shareholder-friendly regime.

At best, however, Unilever will still have faced two years of delay. As Polman was preparing his doomed plan in 2018, another Anglo-Dutch business, the information group RELX, merged into a London-listed company. The plan was approved by 99.99% of shareholders on both sides. The lure of the FTSE 100 index remains hard to resist.

Breakingviews

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