Unilever picks Netherland over UK as base, though retaining HQ of 2 divisions in London

Unilever Thursday announced changes in its corporate and governance structure, the highlight of which is that it will now be one company incorporated in the Netherlands.

In a statement, the company said it has unified its two legal entities, N.V. and PLC, into a single legal entity incorporated in the Netherlands.

It said it is consolidating its headquarters in the Netherlands, abandoning a separate London base, which analysts perceive as a blow to Prime Minister Theresa May’s effort to maintain investment in the U.K. after it leaves the European Union.

Unilever, however, said it would continue to be listed in London, Amsterdam and New York.

The company also said it has evolved into three divisions, beauty and personal care, home care and foods and refreshments.

London is still important to the company’s operation, according to the statement. It said the headquarters of the beauty & personal care division and the home care division will be located in London.

“This secures nearly £1 billion per year of continued spend in the UK, including a significant commitment to R&D.

“The headquarters of the foods & refreshment division will continue to be based in Rotterdam”, it said.

Unilever’s employment of 7,300 people in the UK and 3,100 people in the Netherlands will be unaffected by the changes, it said.

“Unilever’s Board is fully committed to delivering long-term performance and sustainable value for shareholders. The Board believes the move to three Divisions and the simplification of our corporate structure will create a simpler, more agile and more focused company with increased strategic flexibility for value-creating portfolio change.

“Our decision to headquarter the divisions in the UK and the Netherlands underscores our long-term commitment to both countries. The changes announced today also further strengthen Unilever’s corporate governance, creating for the first time in our history a ‘one share, one vote’ principle for all our shareholders,” Marijn Dekkers, chairman Unilever said.

Graeme Pitkethly, the chief financial officer said the move “gives us more strategic flexibility to undertake major M&A using the stock or demerge parts of our business in the future.’’

Losing the headquarters of the U.K.’s third-biggest company, operating in 190 countries, is seen a setback for May’s vision of a post-Brexit economy open to the world. The shift runs counter to a move by information and events business RELX, which recently opted for a single London-based parent company after 25 years of also having a Dutch owner.

“Unilever’s decision to pick the Netherlands over the U.K. is another sign of the weakening of the business environment in Britain since the referendum,” Chris Bryant, a member of Parliament who supports staying in the bloc, said in a statement.

Unilever shares were down 2 percent at 1:10 p.m., London, with those traded in Amsterdam falling 1.5 percent.

Unilever decided to consolidate its headquarters after staving off an unsolicited takeover bid from Kraft Heinz Co. last year. Activist investors have targeted rivals Nestle SA and Procter & Gamble Co., which, like Unilever, are facing sluggish sales of mainstream food and personal-care brands.

Dutch takeover laws provide more protection against hostile approaches than the U.K.’s code. Netherlands Prime Minister Mark Rutte used to work at Unilever, and Paul Polman is Dutch, chief executive officer. Rutte has proposed scrapping a dividend tax, making the country more attractive to multinationals.

The shift is “a great boost for the Netherlands and Rotterdam,” Mayor Ahmed Aboutaleb said via a spokesman, adding that the company opted for a place where “the interests of Unilever are well served, where it will be less of a prey to acquisitions.”

The move keeps Unilever’s headquarters within the EU after the U.K.’s expected departure from the bloc. Its base in Rotterdam will continue to benefit from the free cross-border movement of labor, though Pitkethly said the decision was made on other grounds.

“It’s a pretty historic move and it’s certainly not connected to Brexit,” he said. “Why not? Because it’s such a long-term view we’re taking for the next 30, 50 years.”