Brexit has eclipsed everything else that’s happened in the UK for 27 months straight.
When a single issue is keeping a nation in its grasp, it becomes tempting to see every bit of news through the prism of that particular event.
Unilever is a case in point.
The Anglo-Dutch multinational contemplated simplifying its structure by giving up its British part. It was to turn into a single company in the Netherlands.
Europhiles had a simple explanation for the decision: Brexit!
Boxes were packed, offices measured. Everything had been arranged to bring all activities together under one roof in Rotterdam.
There was just a tiny little obstacle: shareholders could prove a problem.
And they have.
Unilever has realised its proposal won’t get the shareholder backing it needs to move forward. It’s withdrawn the plan to break up its dual structure for now.
Now the Brexiteers have a simple explanation: Brexit!
Not everything is about Brexit, however.
Neither Unilever’s plan for a single Dutch-based headquarters, nor the withdrawal of that plan had anything to do with the UK leaving the EU.
Was the move prompted by Brexit?
Unilever is a consumer goods company known for products like Dove soap, Lynx deodorant and the most British of all food spreads, Marmite.
To see the iconic brown jar with the yellow lid lose its Britishness would no doubt have been a considerable blow to the Brexit brigade.
Not in the least because it would have made former Chancellor and Remain campaigner George Osborne right about something.
He named Unilever as one of the multinational corporations that was sure to abandon the UK if it voted to leave the EU.
When plans surfaced that Unilever was indeed looking to shift important HQ operations from London to Rotterdam, Osborne grinned.
As editor-in-chief of the London Evening Standard, he wrote back in March:
“The Brexiteers scream that Brexit has nothing to do with this, and the company does not want to pile insult onto injury.
“But ask yourself this question: if Unilever had chosen Britain instead of Holland, do you think it would be saying Brexit had nothing to do with it?”
Well, the Brexiteers were in fact right at the time. The planned move didn’t have anything to do with Brexit.
I’ll give you four reasons why.
Unilever had a takeover scare last year. US food company Kraft Heinz tried to eat its competitor.
It narrowly fended off the attack but repeatedly complained about the lack of government support it received during the battle.
Bringing together its different entities in a single Dutch firm would better protect it against foreign takeovers, the argument goes.
The second reason is that it could be a boon for its own M&A activities. It would make it easier for Unilever to acquire other companies itself, says Chris Hughes in Bloomberg:
“If Unilever made a share-based offer for a US company today, paying in two classes of stock could expose the target’s investors to extra taxes” while “twin shares are a red flag to mischievous hedge funds”.
Next, Unilever’s Dutch CEO, Paul Polman, successfully lobbied the Dutch government to scrap the dividend tax for foreign investors. It came at the expense of a massive political row.
The measure wasn’t in any party manifesto, it costs the Dutch Treasury €1.9bn annually, and the public is firmly opposed since they don’t benefit from this tax cut.
There’s strong suspicion of a gentlemen’s agreement: Dutch PM Mark Rutte ends the dividend tax in exchange for Unilever becoming fully Dutch.
And finally, Polman is expected to leave the company soon after being at the helm since 2009.
He was hoping to break up the dual structure and leave the company with a primary listing in Amsterdam. It was to be his legacy.
Was the move rejected over Brexit?
When roles are reversed, opinions are too.
Now that the London office move to Rotterdam is off, Brexiteers are quick to make the Brexit link while Europhiles see no connection.
“Hurrah! Good news for the City, Europe’s global capital market. Despite Brexit, and all that,” Eurosceptic Times columnist Iain Martin tweets.
Again, no need to bring Brexit into this.
Unilever is a solid company that owns a lot of brands we all know and buy from time to time, like Lipton tea and Magnum ice creams.
If you look at its performance on the London stock exchange, you see a typical blue-chip stock. It doesn’t make any big moves but it gradually climbs higher.
It’s about as safe as it gets on the markets. Big funds like having it in their portfolios and it’s the primary reason why the plan was rejected.
It wasn’t in the interest of investment funds to go along. They tend to have mandates that require them to invest only in FTSE 100 stocks.
Funds would have had to sell their shares or deviate from their house rules to invest in a Dutch NV rather than a British PLC.
Which brings us to the second reason: UK investors weren’t given an incentive to back the plan. In return for their support they were offered… nothing, nada.
The board didn’t see the need to offer UK shareholders a premium or a special dividend, something which could have made it more worthwhile for them.
Besides, the law to scrap the Dutch dividend tax for foreign investors hasn’t passed yet while the opposition already threatens to bring it back at the earliest opportunity.
Combine all those reasons and you have to conclude that UK shareholders simply didn’t have enough reason to give up Unilever’s Britishness.
So, is that it? The plan is dead and buried?
Not necessarily. The decision not to proceed with the plans doesn’t automatically put the issue to bed.
“The company has made such a song and dance about the benefits of simplification that it owes it to shareholders to come back with a new proposal that even the recalcitrant minority can accept,” Chris Hughes argues.
One option would be to follow the structure of another Anglo-Dutch company, Royal Dutch Shell. The oil major is a UK company with a Dutch tax domicile.
I’m sure Paul Polman already has Shell CEO Ben van Beurden’s number. Shell was the other company that lobbied for the Dutch dividend tax to be scrapped.