The creation of a unified British Unilever plc will doubtless be portrayed as a victory for the UK outside the EU.
The reality is that it is a huge vote of confidence in the London Stock Exchange and the City.
Given the choice of fading from view in the Netherlands, or being a big £108billion beast in the FTSE 100, it has chosen the UK.
Given the choice of fading from view in the Netherlands or being a big £108bn beast in the FTSE100 Unilever has chosen the UK
This is logical. Unilever has fabulous traditions at Port Sunlight on the Wirral where it has world-beating testing and R&D facilities.
Its cleaning and hygiene brands – the fastest-growing part of the enterprise long before Covid-19 – are run from the group’s stately white stone headquarters at Blackfriars on the bank of the Thames.
The effort two years ago by former Dutch chief executive Paul Polman to move the group’s main quote to Rotterdam ended in humiliation when a stream of UK long holders of Unilever stock raised objections.
They were concerned the Dutch listing would prevent them from holding the equity because of the mandates of some pension funds.
The barrier to shifting domicile was high, requiring a 75 per cent approval vote and the effort failed.
After a decent interval, Polman, having bravely fought off a highly geared take-over bid from Kraft-Heinz and taken Unilever on a green journey, stepped down.
Successor Alan Jope has found the current dual structure cumbersome and particularly harmful for US investors because of onerous capital gains rules on certain transactions. The new set-up allows flexibility.
Covid-19 has not knocked Unilever out of the big deals game. It has just completed the purchase of Horlicks in India from GSK.
The next big transaction is the sale of the traditional tea businesses of Brooke Bond and Lipton, which could raise anything up to £7billion. There are several options on the table, including a demerger.
As far as unification, is concerned, Jope is not home and dry yet.
The Dutch government has been informed and is satisfied that Unilever will remain in the Netherlands with its own HQ. The next obstacle will be securing the agreement of 50 per cent of Dutch investors.
Brokers have done preliminary soundings but it would be just as well if Jope learned from the mistakes of his predecessor, who was at the United Nations in New York when the last vote took place instead of pressing flesh with big battalion investors.
Unilever should come out of Covid-19 reasonably strongly.
Healthcare and hygiene brands Dove, Domestos, Lux et al are having a good war. Hellman’s mayonnaise is firing on all cylinders.
Ice cream and food service have been hit hard. Production and sales in China are back to pre-epidemic levels. Prospects in Latin America, at the epicentre of the pandemic, are less rosy.
If Jope can navigate the unification rocks there is reason for optimism on doing value-creating deals as well as organic growth.
ARM betrayal
Overseas bids for Unilever and AstraZeneca (see page 71) were headed off at the pass. The same, unfortunately, cannot be said for Cambridge smart-chip group ARM Holdings.
When ARM was sold to Japan’s Softbank in 2016 for £24billion, it was waved through by the Government as a signal that post-referendum Britain was open for business.
Without warning, a 51 per cent share in the company’s Chinese division was sold to Chinese investors.
Softbank itself plonked 25 per cent of its holding in ARM into the currently under-pressure Vision Fund, in which Saudi Arabia has a 25 per cent stake.
The latest episode in this corporate tragedy in the making is the eruption of a boardroom row in the Chinese division with claims that chief executive Allen Wu had been fired over serious irregularities. This was later disputed.
Whatever the rights and wrongs, weakening the ownership structure of one of Britain’s tech champions, and exposing it to danger, exposes the risks of overseas ownership.
Vanishing act
Johnson Matthey sees itself at the core of the green revolution, with its catalytic converters and cutting edge R&D into batteries for e-cars.
That can’t protect it from Covid-19 and shifts in global car making. Preserving resources and cutting costs is the order of the day, with 2,500 jobs to go and the final dividend slashed in half. That’s the first cut since the 1980s.
It means that 48 firms in the FTSE 100 firms have announced a cut or suspension of payouts. Cruel times.
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