With every economic and investment decision filtered through the lens of Brexit since 2016, it is no surprise that Unilever’s decision to shift its base to the UK has already been hailed as a triumph for Brexit Britain.
UK business secretary Alok Sharma welcomed the news that Unilever will end its dual Anglo-Dutch structure in favour of a single UK headquartered entity as “a clear vote of confidence in the UK”.
But the reality is that the consumer giant’s previous decision to move its HQ to Amsterdam was never about fleeing a crumbling post-Brexit economic wasteland, and this move is similarly not about rejecting the EU in favour of the UK’s sunlit uplands.
It’s a move borne out of pure pragmatism.
It is said Unilever’s then bosses became convinced of the need to unify its structure after struggling through the sale of its spreads arm back in 2017, and finding it consisted of myriad separate legal entities, some of which were under UK law and some under Dutch.
After fending off Kraft Heinz’s advances in early 2017, Unilever was approaching a period of change – and it wanted to simplify its structure to make those changes as painless and speedy as possible.
Back in 2018 it initially plumped for the Netherlands, but this was roundly rejected by its own shareholders, driven by worries about Unilever ejecting itself from the FTSE 100 and the various tracker funds invested in the company.
Faced with this investor revolt it backpedalled, and the saga arguably hastened the departure of CEO Paul Polman and chairman Marijn Dekkers.
However, the new management remains just as convinced of the benefits of a single structure as the former incumbents did two years ago – so this time they’re hoping Dutch investors will be easier to appease.
The Dutch government expressed disappointment over the decision this morning, with minister for economic affairs Eric Wiebes saying he “regretted” the decision.
But Wiebes also stressed that the decisions would cause no job losses in the Netherlands – and he’s right that in a practical sense, little will change.
The move does, however, suggest there are some major shake-ups on the horizon.
Unilever is already exploring the sale of its tea business, and the restructure suggests plans for more divestments and acquisitions are in the pipeline as it looks to modernise its portfolio and prioritise growth assets.
Notably, its food business will remain headquartered in the Netherlands. This strongly suggests that if Unilever did bite the bullet and spin off its food arm, the Amsterdam Stock Exchange, rather than London, would be the most likely destination.
If Unilever is preparing the ground for some radical action, it is not hard to see why.
Unilever’s underlying sales growth fell to zero in the first quarter, while the coronavirus outbreak is having a damaging effect on its food business – particularly its ice cream sales – meaning it has been forced to withdraw sales and margin guidance for 2020.
Even before the Covid-19 crisis, Unilever missed its full-year sales growth target in 2019 and warned the market it would suffer further weakness in 2020.
Some analysts even speculated that the move could pave the way for a mega-merger with a consumer giant, such as Reckitt Benckiser or Colgate-Palmolive, to reinvigorate the organisation.
Whatever its plans, Unilever remains convinced the move to a single structure will create a “simpler company with greater strategic flexibility, that is better positioned for future success”.
The question now is whether its Dutch shareholders are more amenable to change than its UK investors were.