LONDON — Unilever is simplifying its legal structure as it gears for more M&A deals, with COVID-19 easing and countries unlocking.
The beauty-to-food giant said Thursday it plans to unify its group legal structure under a single parent company, Unilever plc. The move, it said, creates “a simpler company with greater strategic flexibility that is better positioned for future success.”
Unilever, which owns brands ranging from Dove and Ponds to Ben & Jerry’s and Hellmann’s and has a burgeoning premium beauty portfolio, said after a “comprehensive review” over the last 18 months, the board continues to believe that moving from the current dual-headed legal structure to a single parent company will bring significant benefits.
The simplification will lead to “strategic flexibility for portfolio evolution,” including through equity-based acquisitions or demergers, Unilever said. “Such flexibility is even more important as we anticipate the increasingly dynamic business environment that the COVID-19 pandemic will create.”
It said the pandemic demands “having as much flexibility and responsiveness as possible.”
Earlier this month, the consumer giant lost out to Puig and the merchant bank BDT Capital Partners in the purchase of the British makeup brand Charlotte Tilbury, in a deal said to be valued at 1.2 billion pounds. It was one of the frontrunners to acquire the brand, alongside L’Oréal and Shiseido.
Last year, the Unilever Prestige division generated sales of approximately 600 million euros, according to the WWD Beauty Inc Top 100 ranking. Over the past 18 months, it has purchased companies including Garancia, Tatcha and Lenor.
Unilever said the move to consolidate its legal entities will remove complexity and further strengthen its corporate governance, “creating, for the first time, an equal voting basis per share for all shareholders.”
Upon completion of the consolidation, the company said, there would be one market capitalization, one class of shares and — crucially — one global pool of liquidity. Liquidity has become all-important during the COVID-19 crisis, with companies of all sizes looking to fortify their balance sheets and plan for what could be tough years ahead.
The group said it would maintain its multiple listings on the Amsterdam, London and New York stock exchanges.
Unilever said it remains committed to its strategy of long-term growth across all three divisions — personal care, home and food. Last year, it began a full evaluation of its current categories and brands, with a view to accelerating the pace of portfolio change.
The evaluation, it said, laid bare how a simpler legal structure could give Unilever greater strategic flexibility to grow shareholder value, and provide a catalyst for accelerated portfolio evolution and greater organizational autonomy.
The unification of the two legal entities will be implemented through a cross-border merger between Unilever plc and Unilever NV. Unilever NV shareholders will receive one new Unilever plc share in exchange for each Unilever NV share held.
The company said the proposed changes do not impact the underlying economic interests of any shareholder and, for the first time, investors will share exactly the same legal, ownership, dividend, governance and capital distribution rights in a single parent company.
There will be no change to the operations, locations, activities or staffing levels in either the U.K. or the Netherlands as a result of unification. There will also be no changes to the manufacture and supply of Unilever products in the Netherlands and the U.K. as a result of unification.
The Home Care and Beauty and Personal Care divisions will continue to be headquartered in the U.K.
Unilever said it is “very proud of its Anglo-Dutch heritage,” while Nils Andersen, chairman of Unilever, said the board believes that unifying the company’s legal structure will create “greater strategic flexibility, remove complexity and further improve governance. We are confident that unification will help Unilever deliver its vision of driving superior, long-term performance through its multiple stakeholder business model.”
The move to consolidate the legal structure follows Unilever’s botched attempt, two years ago, to move its corporate entity to the Netherlands, and eliminate the dual corporate structure in London and Rotterdam. The plan failed to find favor among Unilever’s big institutional investors, which is why company remains headquartered in both countries.
The plan to move Unilever to the Netherlands had stemmed from the Brexit vote in 2016 and a shock $143 billion takeover bid by Kraft Heinz Co. in 2017. Kraft Heinz withdrew the offer after Unilever spurned its advances and Unilever later undertook a major audit, simplifying its internal structure and selling its underperforming spreads business to KKR.
The company has more recently put its tea business under strategic review and said a demerger of that division is one potential outcome. Unilever said having a single legal structure would make any future demerger less challenging than in the past.