Two of Unilever’s biggest shareholders have expressed concerns about the consumer goods giant’s plan to simplify its business structure to a single headquarters in the Netherlands, adding to a growing opposition in the UK.
Legal & General Investment Management announced on Friday it would be voting against Unilever’s proposal to ditch its dual Anglo-Dutch structure, a move which would see it fall out of the FTSE 100 and FTSE All Share indices.
Heavyweight manager Nick Train (pictured) has also hinted this week that he may have to vote against the proposal, stating that he has “greater concerns” for some of his clients than others.
While his boutique investment firm Lindsell Train has not yet publicly indicated how it will vote, Train told Portfolio Adviser: “We’ve probably got to vote against it”.
LGIM’s unusual declaration
LGIM joins a growing chorus of major investors, which includes Aviva Investors, who have said they will not back Unilever’s plans.
It is currently the fifth largest shareholder with a 2.17% stake in the business.
LGIM said it took the “unusual” step of pre-declaring its voting intention ahead of next month’s extraordinary general meeting (EGM) following a significant volume of enquiries from clients.
Sacha Sadan, director of corporate governance at LGIM, said after engaging with the consumer goods giant on the matter and engaging with other investors via the Investor Forum it was not convinced that the move to a single headquarters in Rotterdam would benefit UK shareholders.
“We understand Unilever has explored a number of alternatives in reaching its final decision. However, we do not believe Unilever has made a compelling case for many PLC shareholders to support the recommendation in favour of Dutch incorporation. Therefore, we intend to vote against Unilever’s proposed resolution.”
Forced sellers of Unilever stock
Train, Unilever’s fourth largest shareholder, is worried that he could become a forced seller if the consumer goods giant shores up enough support to unify its business.
Train’s firm owns 2.34% of the business, equivalent to 28 million shares. Unilever is the largest holding in his £5.8bn UK equity fund, accounting for 9% of the portfolio.
Unilever dropping out of the FTSE 100 would “complicate conversations” with clients in the Lindsell Train UK equity fund who expect the fund to do what it says on the tin and invest predominantly in UK equities, he said.
“Can, on a one a year view, a three year view, can I continue to have a 9% holding, one of my very, very biggest holdings in something that’s no longer a UK company?” he asked.
Aviva Investors chief investment officer David Cumming stated last week that the firm would be voting against the proposal on the basis “a material number of long-standing supportive UK shareholders will become forced sellers”.
“I’m not under any immediate pressure to sell,” Train continued, “but at the very least I’m going to assume that over time investors in that fund are going to say to me, ‘Come on. You’re supposed to be investing in the UK.’”
Train to wait and see on Unilever
But Train said he remains “hopeful” and reiterated the firm would take a wait and see approach.
“We want to engage more with the company to see whether they can make us think that our concerns are exaggerated or can offer mitigation. We’ll see.”
Unilever will hold its EGM on 26 October. Its relocation to Rotterdam must be approved by 75% of UK shareholders.
