Unilever is considering doing away with its long-standing structure of maintaining separate corporations in the UK and the Netherlands, wading into a political storm with governments in both countries likely to put up a fight to keep the headquarters.

The owner of Dove soap and Hellmann’s mayonnaise planned to divest its spreads business as part of a broader overhaul, Unilever said on Thursday. While looking at options for the operation, it had become apparent that the dual-headed legal structure made such changes more complex.

The company has periodically reviewed the set-up over the years, but always kept it in place. “It has become clear to us that given the dynamics around more significant major change, that now is a good time to review it again,” chief financial officer Graeme Pitkethly said.

Losing Unilever would be a blow to UK Prime Minister Theresa May, coming soon after she started divorce proceedings from the EU.

Multinational firms based in the UK have benefited from the decline in the pound since the vote in 2016 for a Brexit, boosting the value of their sales outside the UK.

Foreign Bidders

If Unilever picks the Netherlands, local politicians would get a breather at a time of concern about Dutch firms targeted by foreign bidders, with paint maker Akzo Nobel trying to fend off approaches from PPG Industries.

The dual structure – Unilever is both a London-based public limited company in the UK and an NV, the Dutch equivalent, in Rotterdam, the Netherlands – has been a key part of the company since it was formed in 1930 from the merger of a Dutch margarine maker with a British soap provider.

“Will London win, or Rotterdam?” said Joost van Beek, an analyst at Theodoor Gilissen Bankiers. “They could pick the UK, benefiting from a lower pound as a result of Brexit. On the other hand, with all the research and development efforts here it would be very important for a company like Unilever to stay active in the Netherlands.”

He rates Unilever shares a buy.

The company’s overhaul – including a plan to buy back €5bn of stock and step up its cost-savings efforts – is part of a bid to protect its independence after being caught off guard by a failed takeover attempt from Kraft Heinz.

Unilever CEO Paul Polman has said UK takeover laws put British firms at a disadvantage, giving targets insufficient time to mount a defence and has called for taking the interests of all stakeholders, not just shareholders, into account.

Two Boards

Unilever’s dual structure means the company has two boards of directors, two sets of corporate laws and governance rules to follow, two shareholder bases and thus two annual meetings. Unilever prepares two sets of accounts, one in euros and one in pounds.

“What we are looking at now obviously is the complexity that the legal structure built,” Polman said. “We’ve always been able to live with that.”

The combined company has four stock-market listings – the Dutch company trades on the Amsterdam stock exchange and the UK entity is listed on the London Stock Exchange and each of those shares also trades as American depositary receipts on the New York Stock Exchange. The stocks are included in both the UK’s benchmark FTSE-100 index and the Dutch AEX index.

Unilever bends over backward to operate as one entity. The two boards, for example, have the same members; a director elected by shareholders of the Dutch unit cannot serve unless also elected by the UK division. Management also is the same and there are agreements between the businesses ensuring they work as one.

Under one such pact, each company agrees to guarantee the borrowings of the other.

Single Entity

“It is of profound significance for Unilever, with its dual structure of two parent companies and two different shareholder constituencies, that it is able to operate as nearly as practicable as a single economic entity,” the company says on its website in a document explaining the structure.

Other Anglo-Dutch companies have already changed their structure. For example, in 2005, shareholders of oil company Royal Dutch Shell Group voted to merge the holding companies in the Netherlands and Britain, ending a century-old separation.

The new company, Royal Dutch Shell, has its headquarters in The Hague.

Unilever expected opportunities for acquisitions to come and go more quickly and the company would be able to move more rapidly without the dual structure, Polman said. A spinoff of the spreads business would be easier, he said.

Unilever also said it was integrating food and refreshment businesses into a unit to be based in the Netherlands.

The Foods and Refreshments divisions’ “natural centre of gravity is in the Netherlands”, said Polman, a Dutch national.

Dutch law affords companies more protection against unwanted takeovers than the UK code does. Among other things, it requires boards to take the interests of all stakeholders, not just shareholders, into account. And many Dutch firms have a foundation that can aid in takeover defences. (Bloomberg)

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