Unilever proposes to merge its Anglo-Dutch legal structure into a single UK-based holding company

Unilever (AMS: UNA) said on Thursday that it plans on merging its legal arms in England and Netherlands to form a single, UK-based holding company. In 2018, shareholders rejected the company’s proposal to move its headquarters from London to the Netherlands. At the time, Unilever was faced with Kraft Heinz takeover bid of £113.47 billion, that it swiftly turned down.  

Shares of the company jumped 3% in the morning session on Thursday but then lost all of its intraday gains before the market close. At £42.53 per share, Unilever NV is roughly 8% down year to date in the stock market after recovering from a low of £36.16 per share. Learn more about value investing strategy.

Unilever requires approval from 50% of its shareholders

Since 2018, the consumer goods company has replaced its Dutch chief executive officer and chairman. Following unification, Unilever added, it will be able to practice more flexibility and reduce complexity for potential mergers and acquisitions. Unilever recently announced to have taken a £2.60 billion hit to its ice cream business due to COVID-19.

Unilever’s plan in 2018 required 75% of its shareholders to vote in its favour to be approved. In comparison, its new plan requires approval from a minimum of 50% of its shareholders only. The company said last month that it will provide hygiene kits to uber drivers.

Unilever’s proposal is based on an extensive review that spanned over 18 months. The proposal was also partially accelerated by the company’s plans of demerging its tea business that is likely to meet with complications without the proposed change in structure.

As per the £112.17 billion company, however, it has not yet finalised the decision about its tea business, and a deal is currently not in the pipeline.

Netherlands expresses regret in Unilever’s proposal

Following the approval for the proposed unification, shareholders of Dutch Unilever NV will receive an equal number of shares in the British Unilever Plc. The company also highlighted on Thursday that the proposed move will not affect its listings, locations, operations, staffing, or activities in either of the two countries (England and Netherlands).  

Business minister Alok Sharma of the United Kingdom welcomed Unilever’s proposal calling it a sign of confidence in the UK after its departure from the European Union in January. Netherlands, on the other hand, expressed regret in the company’s proposal despite a reassurance that Unilever will keep its headquarters for Foods and Refreshment (F&R) division in the Netherlands.

The F&R division generates roughly £18.25 billion worth of annual sales for Unilever, representing about 40% of its total full-year sales.