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Unilever’s board is to delay a decision on whether to choose the UK or the Netherlands for its headquarters on account of political emotions running high in Europe.
Paul Polman, chief executive, told the Financial Times that the board of the Anglo-Dutch consumer giant was likely to abandon its dual structure — involving two parent companies, two headquarters and two stock market listings — in favour of a single legal corporation.
A source close to the company said the board was likely to opt for a single structure but had not taken a final decision.
Mr Polman, who fought off a $143bn takeover bid from Kraft Heinz, promised in April to review the group’s cumbersome legal structure and issue its decision at the end of the year.
The complexity of the dual structure was cited by Graeme Pitkethly, Unilever finance director, as a reason making it harder to spin off businesses, such as the group’s margarines unit, which is being sold in an auction. It also makes it harder to undertake large deals involving shares, though under Mr Polman, Unilever has preferred small acquisitions.
The review was part of measures announced in April to placate investors after the US food group’s aborted bid. But Mr Polman said that he was recommending that a decision be delayed on where the unified company should be based — in Rotterdam or London — the site, respectively of its Dutch and UK headquarters. He declined to elaborate.
Tensions are running high between the UK and the European Union over the Brexit negotiations, risking Unilever’s eventual choice becoming politicised.
“I’m advocating to postpone decisions because it’s a moving playing field — with political turbulence out there. The emotions of the moment are really the issue,” he said.
Asked whether he was referring to Brexit, Mr Polman, a Dutchman and advocate of the UK remaining in the EU, said: “It’s on all sides nowadays — of that you have to be clear. The board is going to take a 30 to 50-year decision. We want to do that well and we want to do that properly.”
Unilever’s dual-headed legal structure stems from the 1929 merger of the UK’s Lever Brothers with Margarine Unie of the Netherlands and the group has deep roots in both countries, each of which regard it as their own.
The company behind Sunsilk shampoo, Axe deodorants and Ben & Jerry’s ice cream is the biggest by market value in the Netherlands and is the third-biggest in the FTSE 100.
Mark Rutte, the Dutch prime minister who once worked for Unilever, has been active behind the scenes in urging the group to retain its headquarters in the Netherlands.
The UK has been slower to react but has recently stirred into action. “The British government has woken up,” said Mr Polman, who is nearing the end of his tenure at a company he has headed since 2009. A hunt for his successor is under way.
Mr Polman played down the significance of an eventual decision, arguing that the multinational is increasingly devolving decisions to local management and pays taxes mainly according to where its operations are based.
“We really are moving to a dispersed operating model. Our headquarters will be very marginal structures,” he said. The group employs 169,000 people, with 7,500 in the UK and 3,000 in the Netherlands.
Corporate lawyers say that companies do not have to have their primary stock market listing where they have their headquarters — raising the possibility that Unilever could eventually opt to have its HQ in the Netherlands but its primary listing in the UK.
Analysts at UBS said: “Simplifying Unilever’s legal structure could make equity issuance and/or de-mergers easier to undertake; and reduce complexity. We think increased optionality on strategic portfolio management has a value.”
Unilever reviewed its legal structure in 2005 but decided against a single corporate entity, arguing at the time that such a shift would have adverse tax consequences for investors.