A big UK shareholder in Unilever has warned it plans to vote against the consumer goods group's proposal to move its headquarters to the Netherlands in a sign of growing unrest among British investors.
The asset management arm of insurer Aviva, the ninth-largest holder of Unilever’s UK-listed stocks, said it was not convinced that scrapping the dual UK-Dutch structure was the best thing for the group or its investors.
In separate votes next month, Unilever must convince 75 per cent of UK shareholders for the proposal to pass, as well as 50 per cent of Dutch investors.
Value
David Cumming, chief investment officer for equities at Aviva Investors and one of the most influential figures among UK institutional shareholders, said Unilever will not be a British company if the proposed move goes ahead, which will result in some investment funds becoming forced sellers of the shares.
If approved by shareholders on October 25th and 26th, the maker of Dove soap will be kicked out of the FTSE 100 index, forcing passive funds that use the popular benchmark, as well as many active funds, to sell their holdings.
“We are not supportive and we will vote against it,” Mr Cumming said. “It doesn’t add any value for us, we lose quite a large company from the index and we don’t see any justification for the move.”
He added: “We would encourage other institutional shareholders to do the same as us.”
Aviva Investors is the first asset manager to speak out against the relocation since Unilever last week released a set of documents detailing its proposal to scrap its dual headquarters of London and Rotterdam for a single Dutch location.
Unilever argues that simplifying the company under a single holding company in the Netherlands will make it more competitive by making it easier to sell off and buy assets, as well as provide better governance.
It remains to be seen how many shareholders will join the ranks of Aviva in voting against the move. The shareholder base is fragmented, with large numbers of investors holding small amounts of Unilever's UK shares. Only BlackRock, the world's largest asset manager, and Leverhulme, a trust, hold more than 5 per cent of the company, according to Bloomberg data.
Concerns
However, more than 10 of the company's top 50 shareholders have expressed concerns privately to the Financial Times in the run-up to the vote.
A Unilever spokesman said the company was confident it would carry the vote. “We have engaged extensively with our shareholders and we believe the vast majority are fully supportive of the board’s proposal.”
Aviva owns nearly 17m shares of Unilever UK shares across its different funds, according to Bloomberg data last updated in mid-August. The position accounts for 1.4 per cent of Unilever’s UK shares.
Nick Train, joint founder of another big shareholder Lindsell Train, echoed Mr Cumming’s concerns about becoming a forced seller “at a time and price not of our choosing”. In July, Lindsell Train held a 2.5 per cent stake in the company.
Mr Train also warned that there is the possibility that a Dutch withholding tax could be levied on dividends for UK-based investors in the future. The Dutch government has announced plans to scrap the tax, but faces domestic opposition from those who see them as a giveaway to foreign investors.
‘Global strategies’
“For all of our UK clients, whether invested in our UK or global strategies, the proposal to redomicile Unilever to the Netherlands introduces a new risk that they have not previously faced,” Mr Train said. “We admire Unilever as a company and have a high regard for its current executive team and board, but on this issue we will vote in the interests of our various clients as we judge appropriate.”
Unilever said it had a plan to protect shareholders if the government does not scrap the tax by 2020 as planned. “Shareholders would receive dividend substitution payments free of dividend withholding tax for a considerable period of time,” it said, adding that the board would also consider other “alternative structures or measures” to mitigate the tax on foreign investors.
Copyright The Financial Times Limited 2018
