Unilever has been dealt another blow in its bid to convince British shareholders to back its plans to move its headquarters to the Netherlands after the UK’s largest asset manager said it would vote against the relocation.
Legal & General Investment Management, the sixth-largest shareholder in Unilever Plc, has added its voice to Aviva Investors, Columbia Threadneedle and M&G Investments, which have all warned they will not support Unilever’s proposals to scrap its dual Anglo-Dutch structure.
Sacha Sadan, director of corporate governance at LGIM, which holds 2.28 per cent of Unilever’s share capital, said the $1tn asset manager had been a shareholder in the company for more than 25 years and engaged heavily with the maker of Dove soap on the proposed relocation.
However, he added: “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.”
Another large shareholder, Schroder Investment Management, also declared late on Friday that it would vote against the company’s resolutions.
As a result, investors holding roughly 11.5 per cent of Unilever’s UK stock have already said they are unsupportive of the plans, according to a Financial Times estimate.
Their frustration stems from the fact that the company will be kicked out of the FTSE 100 index once it moves, forcing passive funds that use the popular benchmark, as well as many active funds, to sell their holdings.
Three-quarters of Unilever’s UK share capital needs to be voted in favour for the proposal to pass. The company also needs a majority of UK shareholders present or represented to vote in favour of the move at an October 25 meeting.
It is the latter requirement that makes the outcome quite difficult to predict.
“Much will depend on the turnout,” said Henri Dumeny, an analyst at Makor Group, an independent research provider. “If lots of small shareholders come out and vote against, they could sink the proposal.”
In addition to the 11 per cent of the UK listed shareholders already declared, analysis by Makor’s Henri Dumeny found a further 4.7 per cent would likely vote against it given their investment mandates. That takes the total to 16 per cent, still short of the 17.5 per cent threshold needed to block the proposal if the quorum of shareholders attending the vote was 70 per cent, in line with the past five years’ average.
Unilever appears increasingly aware that it has a fight on its hands. The chairman and chief financial officer launched a media offensive on Tuesday in an attempt to convince shareholders of the benefits of the switch. Marijn Dekkers, chairman of Unilever, urged small UK shareholders to back the proposal.
Mr Dekkers repeated that the move was the best option for Unilever to remain competitive in a packaged food and consumer industry entering a period of consolidation and lower growth. Having a unified corporate structure and one type of share would make it easier to sell off and buy assets, as well as provide better governance, he argued.
Unilever said on Friday that it would continue to “engage with its shareholders”. It has also hired Georgeson, the shareholder adviser group, to help it co-ordinate voting and lobby shareholders.
The Investor Forum, a group of big investors in the UK, said it had engaged with Unilever over its members’ concerns.
In addition to LGIM, Aviva Investors, Columbia Threadneedle and M&G Investments, Lindsell Train, the investment house co-founded by well-known fund manager Nick Train, has heavily criticised Unilever’s plans. Lindsell Train said it holds 2.5 per cent of the company’s shares as of September.
Standard Life Aberdeen, which holds 2.4 per cent of the company’s UK shares, is also expected to vote against the move in its passive funds, as well as in active funds that use the FTSE as a benchmark. NFU Mutual, a top 60 shareholder, will also vote against the relocation.
In addition to the 11 per cent of the UK listed shareholders that have come out against the switch, analysis by Makor’s Henri Dumeny found a further 4.7 per cent would likely vote against it given their investment mandates. That takes the total to 16 per cent, still short of the 17.5 per cent threshold needed to block the proposal if the quorum of shareholders attending the vote was 70 per cent, in line with the past five years’ average.
Last week, ShareSoc and UKSA, associations for small shareholders, urged individual investors to vote against the move. “UKSA and ShareSoc are very doubtful whether these changes will be in the best interests of most private shareholders,” it said.
Only BlackRock, the world’s largest asset manager, and Leverhulme, a trust, hold more than 5 per cent of the company. Neither have publicly commented on how they plan to vote.