Theresa May braced for Unilever decision on unified headquarters

Theresa May is bracing for Unilever to choose the Netherlands over the UK for its new unified headquarters, after months of political pressure from both sides and amid an "emotional" atmosphere supercharged by Brexit.

UK officials have held talks with Unilever amid fears at the top of government that the Anglo-Dutch consumer group is about to decide to have its main base in Rotterdam, rather than London.

Although they have not lost all hope of winning the tussle with the Netherlands, one British official briefed on the discussions admitted: “It wouldn’t be a great surprise if it happened.”

A final decision has not been taken, though the issue is expected to be decided at the next scheduled board meeting in the second week of March.

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Decision

Earlier this month Unilever said it would issue its decision “shortly”. Greg Clark, UK business secretary, and Alex Chisholm, the senior official at Britain’s business department, have been talking with Unilever in an effort to ensure that the shake-up does not impact negatively on the British economy.

The British side hopes that even if the new unified headquarters is in Rotterdam, the UK would benefit from other decisions in the big shake-up planned by the company, including research jobs.

Unilever has a dual legal structure involving two parent companies, two headquarters — in Rotterdam and London — holds two annual meetings and has two separately listed companies.

The company decided to simplify its structure to placate investors after fending off a $143 billion takeover bid from Kraft Heinz of the US a year ago. A single share structure would make issuing new shares or de-merging businesses easier and the company has said that unification would be in the best interests of shareholders.

Unilever employs 169,000 people, with 7,500 in the UK and 3,000 in the Netherlands. the multinational is likely to play down the significance of its decision to avoid being caught up in a political firestorm.

Paul Polman, chief executive, said last November that the multinational is increasingly devolving decisions to local management and pays taxes mainly according to where its operations are based. More than 90 per cent of its sales are outside the UK and Netherlands.

However, the choice of the Netherlands for the company’s main base would be highly sensitive politically and would inevitably be drawn into the debate about the impact of Brexit on the UK economy.

To add to the awkwardness, Mrs May met Mark Rutte, the Dutch prime minister, at Number 10 on Wednesday for talks on Brexit.

Mr Rutte, who has lobbied to secure the Unilever headquarters for Rotterdam, was once part of the company’s human resources department and played a leading role in several reorganisations.

Dividend

His decision in December to scrap a 15 per cent dividend withholding tax sparked domestic protests but favours international investors in Dutch companies. The Netherlands also has rules in favour of long-term investors and gives a greater voice to a broader range of stakeholders in corporate decisions, in contrast to the UK’s focus on shareholders.

Mrs May promised in last year’s Conservative party manifesto to reform rules on takeovers and prevent “aggressive asset-stripping or tax avoidance” but has yet to implement any measures.

With deep roots in both countries, the UK and Netherlands each regard Unilever as their own, making it inevitable that any move to a unified corporate structure would become politicised.

Mr Polman, a Dutchman who is expected to retire from Unilever next year after a decade at the helm, said in November that he wanted to pause temporarily the headquarters decision because of “political turbulence”, adding: “The emotions of the moment are really the issue.”

Mr Polman, an 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.”

The group’s chairman, Marijn Dekkers, is also Dutch. Unilever’s dual-headed legal structure stems from the 1929 merger of the UK’s Lever Brothers with Margarine Unie of 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 opt to have its HQ in the Netherlands but its primary listing in the UK.

The UK’s department of business said: “The government remains in regular contact with Unilever and we will continue to work with them during this process.

“Through our recently published industrial strategy, we are working with companies across the UK to create an environment where businesses can thrive.”

– Copyright The Financial Times Limited 2018