We rejoice at a sinner that repenteth. The humiliation of the Unilever directors would have been far less had they been paying attention here in April, when their ill-judged “simplification” scheme was first criticised, or here in June with the question for plc shareholders: “Is this proposal really in my interests, or just those of the board?”

The suspicion that Unilever was trying to bounce the plc shareholders into considering this far-reaching move as a routine matter was there from the start, in the original press release, entitled “Building the Unilever of the Future.” After burbling on about how British Unilever’s businesses were, moving head office and domicile to Rotterdam was mentioned, almost casually, in the sixth paragraph.

The response to early criticism of the proposal was similarly dismissive. Fund managers who met the company reported a dialogue of the deaf. What looked to them as a demand that their clients take one for the team was viewed by Unilever as a small minority trying to thwart the best interests of the company.

There was no question of changing the proposal, merely the repeated assertion that a big majority of Unilever plc shareholders were in favour, even though none of the biggest names was endorsing it publicly. The argument focussed on whether New Unilever could be retained in the FTSE100 index, but this always looked something of a red herring. The company lobbied hard to persuade FTSE to bend its rules, even though Newnilever would have been no more a British company than, say Nestle.

The underlying suspicion, which Unilever denies, was that the curious move by a major international business to a secondary financial centre was really a consequence of Brexit and the wish of the board to put the control of the business into Dutch hands. Contested takeovers of Dutch companies are also even harder than they are in London.

However, once the formal “simplification” document was published last month, retreat was always going to become much more difficult. How much more was provided by a single, somewhat ambiguous paragraph in the 120-page document. This revealed that in addition to the 75 per cent majority of shares cast to allow the scheme to proceed, a majority of shareholders voting in favour was needed before the court would approve the capital reorganisation.

In theory, this gave a holder of a single share the same voting power as Blackrock, Unilever’s biggest shareholder. This was a formidable, perhaps insuperable, hurdle, since many individual holders would vote against such a scheme out of sentiment. In practice, few of them would have been able to do so.

Today’s investors hold their shares through platforms or brokers who use nominee accounts for convenience, cost and security. There are thousands of owners of such a widely-held stock, but there may be only one nominee for the platform on the shareholders’ register. Unilever was proposing to treat a single nominee as a single shareholder, making a mockery of the court’s requirement.

This was sure to cause trouble at the shareholders’ meeting had it gone ahead, but at least this episode has highlighted how the convenience of nominee holdings has effectively disenfranchised the majority of individual shareholders. Small shareholders are already an endangered species, and unless the rules are changed, will become even more scarce.

As for the Unilever directors, their lack of proper preparation for an intelligent simplification of the capital structure of the business has been exposed, along with their refusal to respond to outside criticism. They have now saved themselves the embarrassment of seeing their scheme defeated, which would surely have led to departures. They should consider themselves fortunate.

This is my extra FT column from Saturday

 

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