Going DutchUnilever picks Rotterdam

PROUDLY overlooking the River Thames, Unilever House looks more royal palace than office building. Built on the site of a Tudor estate, for nine decades it has been the London home to Unilever, one of the world’s largest consumer-goods firms. Since a merger of British soapmakers and Dutch margarine merchants in 1929, Unilever has been a dual-nationality company. It is legally domiciled in Britain and the Netherlands, with headquarters in both the London building and in Rotterdam.

The appeal of dual citizenship has faded. After a year-long review, on March 15th Unilever’s board announced plans to move its legal base to Rotterdam. (The firm will continue to have a listing in London, and claims no British jobs will be lost.) Many in the City of London finger Britain’s decision to leave the European Union for the move. But Graeme Pitkethly, the firm’s chief financial officer, insisted Brexit was “absolutely not a factor” in the decision. Over the past decade Unilever has been shifting its production facilities nearer to its customers in other parts of the world. Even Britain’s possible exit from the EU’s customs union would not affect its operations as much as it once would.

Instead the company claims that the new structure will make it “simpler, more agile and more focused”. Under its current structure, the shares of Unilever NV cannot be exchanged for those in Unilever PLC, its British sibling. This makes it much harder to buy or spin off its businesses. Unilever’s chief executive, Paul Polman, wants to boost profits by selling low-margin foods divisions and moving into more profitable areas such as personal-care products. That makes a single entity alluring.

There may be another reason. Unilever makes money by selling well-known brands in over 190 countries. But consumers are switching to local alternatives, especially in China. Activist investors are circling. In 2017 Kraft Heinz, an American food giant, made a hostile bid for Unilever worth $143bn. The company had to fight it off. Mr Polman has argued in the past that British takeover rules favour the predators, and that the Netherlands offers a more level playing field. Although this week he denied that was a factor, the liberal takeover rules which used to attract firms to Britain may be scaring some away.