Pension fund adviser rejects Unilever’s Dutch switch

Pension fund adviser rejects Unilever’s Dutch switch

A leading adviser to British pension funds has called on UK investors to vote against Unilever’s plans to move its headquarters to the Netherlands as the maker of Dove soap gears up for a tetchy shareholder meeting this month.

Pensions & Investment Research Consultants, which advises investors with more than £1.5tn in assets, including local authority pension funds, said shareholders of Unilever’s UK stocks should reject the consumer goods company’s plan to ditch its dual Anglo-Dutch structure.

Its advice came as Royal London Asset Management, the UK asset manager, announced it would vote against the move, adding its voice to a growing number of fund managers that have spoken out about the relocation.

Shareholders with more than 12 per cent of Unilever’s UK stock, including Aviva Investors, Legal & General Investment Management and Columbia Threadneedle, have already said they are unsupportive of the plans.

Their frustration stems from the fact that the company will be kicked out of the FTSE 100 index if the switch goes ahead, forcing passive funds that use the benchmark, as well as many active funds, to sell their holdings.

In its advice to clients, Pirc said it was concerned about the impact on investors who could be forced to sell their shares.

“The company’s exclusion from the FTSE 100 may compel some shareholders to sell their shares at a price and time that is not of their choosing, effectively resulting in a forced selling decision,” it said.

“The company has taken an important step to simplify the governance structure but it hasn’t set out to shareholders what alternative steps could have been proposed that would meet its corporate objectives without the disenfranchisement of a section of shareholders.”

Mike Fox, head of sustainable investments at RLAM, which says it holds 0.72 per cent of the company, said many UK Unilever shareholders who backed the resolution were “effectively voting for forced divestment of their holding”.

“Unilever might be able to convince European shareholders that the move makes sense for the company and for them as investors in the long term, but it’s hard for a UK investor to see an incentive to vote in favour,” he said.

“We think that Unilever is a high-quality company, both in its own right and as a key constituent of a number of UK indices, and have therefore decided to vote against the upcoming resolution.”

Unilever on Wednesday said: “We have held around 200 meetings with shareholders over the past six months and continue to engage extensively. We believe simplification brings clear strategic benefits for shareholders, including even stronger governance and the move to a ‘one share one vote’ principle.”

With signs of a fight on its hands, the company launched a media offensive in recent weeks to convince shareholders of the benefits of the switch.

Marijn Dekkers, chairman of Unilever, last week repeated that the move was the best option for Unilever to remain competitive in a packaged food and consumer industry entering a period of consolidation and lower growth.

He added that having a unified corporate structure and one type of share would provide better governance, as well as making it easier to sell off and buy assets.

In a report to clients, however, Pirc said it “could be viewed that [UK] shareholders are being asked to consent to a takeover without a premium being paid”.

Three-quarters of Unilever’s UK share capital needs to be voted in favour for the proposal to pass. The company also needs a majority of UK shareholders present or represented to vote in favour of the move at a meeting on October 25.

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