Building the Unilever of the Future
London/Rotterdam, 15 March 2018 - Today we are announcing the next steps in the transformation of Unilever into a simpler, more agile and more focused business. The changes will further drive long-term performance and shareholder value, and build upon our Connected 4 Growth programme.
Firstly, we are evolving our structure to be based on three Divisions:
- These Divisions - Beauty & Personal Care, Home Care, and Foods & Refreshment - will be more empowered, with greater responsibility for making long-term strategic choices and managing financial performance.
- All three divisions will continue to benefit from Unilever’s global scale and route to market.
- The headquarters of the Beauty & Personal Care Division and the Home Care Division will be located in London.
- This secures nearly £1 billion per year of continued spend in the UK, including a significant commitment to R&D.
- The headquarters of the Foods & Refreshment Division will continue to be based in Rotterdam.
Secondly, we are proposing to simplify our corporate structure:
- Unilever intends to simplify from two legal entities, N.V. and PLC, into a single legal entity incorporated in the Netherlands. This reflects the fact that the shares in N.V. account for approximately 55% of the group’s combined ordinary share capital , and trade with greater liquidity than PLC shares.
- Unilever will continue to be listed in London, Amsterdam and New York.
The proposed simplification will provide greater flexibility for strategic portfolio change and help drive long-term performance.
The changes also further strengthen Unilever’s corporate governance, creating, for the first time, a ‘one share, one vote’ principle for all shareholders. Upon completion, the N.V. preference shares will be cancelled, and it is intended to close the N.V. Trust Office and terminate the related depositary receipt structure. Unilever will also continue to apply both the UK and Dutch corporate governance codes.
Unilever’s employment of 7,300 people in the UK and 3,100 people in the Netherlands will be unaffected by the changes announced today.
Marijn Dekkers, Chairman of Unilever:
“Unilever’s Board is fully committed to delivering long-term performance and sustainable value for shareholders. The Board believes the move to three Divisions and the simplification of our corporate structure will create a simpler, more agile and more focused company with increased strategic flexibility for value-creating portfolio change. Our decision to headquarter the Divisions in the UK and the Netherlands underscores our long-term commitment to both countries. The changes announced today also further strengthen Unilever’s corporate governance, creating for the first time in our history a ‘one share, one vote’ principle for all our shareholders.”
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The move to three Divisions and the simplification of the corporate structure will deliver the following:
Driving stronger performance
With the Connected 4 Growth programme and the set-up of Country Category Business Teams, announced in 2016, we have implemented a more consumer-facing organisation that enables us to roll out global innovations faster and be more agile in responding to local trends. Today’s announcement represents the next step in our transformation, enabling the Beauty & Personal Care, Home Care and Foods & Refreshment Divisions to drive stronger performance across our markets.
The Divisions will develop innovation, including strategy, research, product development and advertising. In addition, they will now be better equipped to make in-year trade-offs and allocate resources more dynamically between geographies, which will further increase our agility and competitiveness in our markets. Each Division will make its own investment decisions based on its strategic objectives, and will make recommendations for capital allocation, both in the supply chain and in developing the portfolio through M&A.
The Divisions will continue to benefit from Unilever’s global scale, including access to capital, procurement across the value chain, shared services and information capabilities such as our U-Studios and People Data Centres. The Divisions will also leverage the strengths of our local management teams and our combined distribution scale, particularly in emerging markets.
From dual-headed structure to single holding company
Unilever has been owned through two separately listed companies, a Dutch N.V. and a UK PLC, since its formation in 1930. These companies have been governed by complex agreements to maintain parity between economic rights of the respective shareholders. The shares in N.V. represent the larger portion of Unilever (55% of the group’s combined ordinary share capital), and trade with greater liquidity than PLC shares.
The strategic review concluded that a single holding company brings greater simplicity and more flexibility to make strategic changes in our portfolio in the future, should we choose to do so, including through equity-settled acquisitions or de-mergers. While we do not currently plan any major portfolio change, we believe it is appropriate to create a corporate structure that provides the Group with the strategic flexibility and optionality to do so.
We intend to introduce a single holding company with one class of shares and a global pool of liquidity. This company will be incorporated and tax-resident in the Netherlands. We will seek a premium listing on the London Stock Exchange, and listings on Euronext in Amsterdam and on the New York Stock Exchange. Following simplification, shareholders of PLC and N.V. will share the same dividend and capital distribution interests in the new holding company, and in the same relative proportions in the combined Group, as before. Our strategy and the 2020 financial goals will be unchanged by the simplification of the corporate structure. Unilever expects the maintenance of its strong credit rating to be unaffected. All debt which benefits from a guarantee from the current N.V. and PLC holding companies, or other group companies, will continue to benefit from such a covenant combined, in due course, with a guarantee provided by the new Dutch holding company. New debt will be treated in the same way.
In the last fifteen years, Unilever has taken major steps to be at the forefront of good corporate governance. This included the acquisition of N.V. preference shares in 2017 which held disproportionate voting rights. Today’s announcement will further strengthen our corporate governance. Upon completion of the new corporate structure, the preference shares will be terminated, and it is intended to close the N.V. Trust Office and terminate the related depositary receipt structure. Unilever will continue to apply both UK and Dutch corporate governance codes. The Board of Unilever will become the Board of the new single holding company. We will continue to hold annual elections of all Board members, approved by a simple majority of those voting at the meeting.
At this year's N.V. Annual General Meeting, we will be seeking authority for the issue of a smaller number of shares on a non pre-emptive basis than in previous years: for general corporate purposes it will be lowered from 10% to 5% of the issued share capital and the additional authority in case of acquisitions will also be lowered from 10% to 5% and we intend to adopt the same approach in the new holding company (“New N.V.”).
Unilever will continue to report its earnings and declare dividends in euros, as has been the practice for many years. There will be no change to our policy of seeking to pay an attractive, growing and sustainable dividend. Payments and record dates will continue on the current quarterly schedule.
Arrangements will be made to ensure that those UK shareholders who prefer to receive dividends in pounds sterling can continue to do so. Holders of US listed shares will continue to receive dividends in US dollars.
Unilever N.V. dividends are currently subject to Dutch dividend withholding tax at a rate of 15%. The Dutch government has announced that the Dutch dividend withholding tax will be abolished from 1 January 2020. Following simplification of the corporate structure and until such abolition, shareholders in the new Unilever holding company will be able to receive distributions in the form of a capital repayment for Dutch tax purposes which will be paid without Dutch dividend withholding tax.
Establishing the new company
The simplification of the current N.V. and PLC holding companies under New N.V. will be achieved through a combined process involving, for PLC, a UK scheme of arrangement and, for N.V., a Dutch statutory merger.
One new ordinary share in New N.V. will be issued for each N.V. ordinary share and for each PLC ordinary share, thus maintaining the relative economic interests of shareholders, and in particular, the current parity between the two shares and the equalized dividends.
The proposed simplification will be subject to certain conditions, including the approvals of shareholders in current N.V. and PLC, and applicable regulatory consents. The Executive of the UK Takeover Panel has confirmed that the UK Takeover Code will not apply to the simplification transaction.
Transfers of shares in New N.V. on Euronext in Amsterdam and on the New York Stock exchange will not be subject to UK transfer duties. In order to facilitate trading of New N.V. shares on the London Stock Exchange, Unilever proposes the creation of Depositary Interests (DIs), which can be traded in GBP – such trades of shares in a non-UK resident company will also not be subject to UK transfer duties.
Further information will be provided in the shareholder communication which will be circulated in the months leading up to the extraordinary general meetings to be convened to approve the corporate structure change. Proposals are expected to be placed before shareholders around the end of Q3 with implementation anticipated towards the end of 2018.
The exchange of shares in N.V. and PLC for New N.V. shares is not expected to be a taxable event for shareholders resident in the Netherlands, UK or US.
We are conscious that a number of investors currently invest in Unilever PLC or N.V. due to their respective membership in indices. Currently only the proportion of Unilever’s value represented by PLC is included in the UK indices and only that represented by N.V. is included in the Eurozone indices. After simplification, any index in which Unilever is represented will reflect the full value of the Group, but Unilever may be designated under only one index nationality. We will commence discussions with the major index providers to determine how they would treat Unilever on completion of the proposed, simplified Group structure.
The following will not change as a result of the measures we have announced today (once the process of simplification is complete):
- Unilever’s spend in the UK and the Netherlands
- Unilever’s employment of 7,300 people in the UK and 3,100 in the Netherlands
- Unilever shares being listed and traded in London, Amsterdam and New York
- The manufacture of Unilever products in the UK and the Netherlands
- A single, Unilever Board, elected annually
- Unilever applying both the UK and Dutch corporate governance codes
- Parity in the dividend and capital return interests of shareholders
- Unilever operating from London and Rotterdam