Unilever has been forced to confront a mounting rebellion among some of its largest investors against the Dove soap maker’s decision to abandon its 89-year-old Anglo-Dutch structure and base itself in the Netherlands.
The company has quietly set up meetings with UK-based shareholders to convince them of the benefits of simplifying the business into one corporate entity based in Rotterdam, rather than London.
Four shareholders have privately told the Financial Times they are “extremely worried” about the proposal. Three of the investors are in the top 20 biggest for the company, with one in the top 40.
In particular, they object to Unilever’s likely exclusion from the FTSE 100, a popular benchmark index used by funds, fearing they would be forced to sell their shares at an unfavourable price.
Their concerns indicate Unilever could face a tough battle to convince investors when the matter is put to a vote around the end of September. It needs the approval of 75 per cent of UK shareholders and 50 per cent of Dutch shareholders. Both sets of investors must agree, for the vote to be carried.
A vote against the restructure would be a huge blow to the company and a sour end to what is expected to be chief executive Paul Polman’s final year after almost a decade at the helm.
A fifth investor, Columbia Threadneedle Investments — a top 10 shareholder — spoke out publicly last month against the controversial move and criticised Unilever for a “lack of engagement with shareholders”.
One large shareholder said his company held discussions with Unilever officials about the affect of the company falling out of the FTSE 100 index, adding it could have a huge impact on his business.
“For any fund with links to the benchmark, [having] such a large off-benchmark holding would be a challenge. There will be a lot of forced selling,” he said.
Another large shareholder with concerns about the plan said Unilever’s charm offensive came in the wake of Columbia Threadneedle’s criticism, suggesting the company feared other investors could follow suit.
“They are finally talking. They have become much more friendly now,” he said.
A rival asset manager, who is unsure whether to back the move, said: “Since Columbia came out, they have been trying hard to talk to shareholders.”
Unilever said that only a small group of shareholders were affected. “We have engaged extensively with Unilever shareholders on our proposal. In these discussions, shareholders have confirmed their support, recognising that it offers the best means to drive long-term performance and value.
“There is a small group of shareholders whose holding may be directly affected by our proposal and we will continue to engage with them. We remain highly confident of achieving the required level of shareholder support.”
The decision to simplify Unilever’s corporate structure was triggered by last year’s unwelcome $143bn bid from Kraft Heinz, the 3G Capital-backed US food group, which Mr Polman managed to fight off.
Moving to a single shareholder structure would make it easier for Unilever to issue stock, make large acquisitions and de-merge businesses. Dutch takeover rules also make it harder to mount hostile bids than in the UK.
Unless a special exemption is made, Unilever is almost certain to fall out of the index because of its intended Dutch domicile, inclusion in the Euro Stoxx index and higher trading volumes in the Dutch NV company.
It is the third-biggest company in the index with a market value of £117bn. It has said that it will maintain a premium listing in London and a New York listing.
A senior figure at another of the company’s largest shareholders said the fund house was reluctant to back the move, but had yet to make a final decision. He added that the asset manager was unlikely to be swayed by the public relations offensive.
“It is a steep hurdle with the two share classes voting separately. Sometimes turkeys do vote for Christmas, though,” he added.