Unilever (ULVR) Signals Probable Exit From FTSE 100

[CommissarJones]

Bloomberg reports. Potentially of interest to holders.

[idpickering]

Bloomberg reports. Potentially of interest to holders.

Thanks for this CommissarJones. Whatever is a HYPer living in Britain to do? Not sure I want a share that's only listed elsewhere. Thoughts on this gang?

Ian.

[tjh290633]

It doesn't say that it will not be listed on the LSE, only that it may not be a constituent of the FTSE100.

If you have a look at http://www.stockchallenge.co.uk/ftse.php you will see three companies quoted on the LSE which are not in the index, Banco Santander SA, Worldpay Inc and South32 Ltd, all of which are firmly in FTSE100 territory.

TJH

[Breelander]

... Whatever is a HYPer living in Britain to do? Not sure I want a share that's only listed elsewhere...

Leaving the ftse100 is NOT the same as delisting from the London Stock Exchange, apparently there's an addition fee to pay to be a member of a 'ftse index'.

Look at the case of Banco Santander SA (BNC) which is listed on the London market but not in any index. Were it to pay to join the ftse100 it would rank 8th, between Diageo and Rio Tinto.

Rank EPIC  Name              Index     Price     Mkt cap (m)*
...
7    DGE  Diageo             FTSE 100  2,748.50  67,617.5 
     BNC  Banco Santander SA             403.40  65,093.2 
8    RIO  Rio Tinto          FTSE 100  4,215.00  56,079.4

http://www.stockchallenge.co.uk/ftse.php

[Dod101]

If I remember correctly, when they made their announcement re registering on Rotterdam, they went out of their way to say that they would maintain the two main listings, in London and Rotterdam. Membership of the FTSE100 is outside of their control but I would expect them to lobby to be kept in it although I do not know what the FTSE rules are. I do not think it is just a matter of paying a fee.

I would think for us investors nothing much will change, merely one company called Unilever NV or something. It is a pity they did not take follow Royal Dutch Shell and have the registered office in London but the operational HQ in Holland. It is I guess no more than an admin matter although of course FTSE100 index funds will no longer hold it.

The same arguments must have been made when Uni and Lever Brothers merged and so then they came up with the compromise which is now being dismantled.

Dod

[Dod101]

If you have a look at http://www.stockchallenge.co.uk/ftse.php you will see three companies quoted on the LSE which are not in the index, Banco Santander SA, Worldpay Inc and South32 Ltd, all of which are firmly in FTSE100 territory.

And all of whom are incorporated outside of the UK surely?

Dod

[tjh290633]

If you have a look at http://www.stockchallenge.co.uk/ftse.php you will see three companies quoted on the LSE which are not in the index, Banco Santander SA, Worldpay Inc and South32 Ltd, all of which are firmly in FTSE100 territory.

And all of whom are incorporated outside of the UK surely?

Dod

What about CRH then?

TJH

Moderator Message:
Quote fixed. - Chris

[Breelander]

If I remember correctly, when they made their announcement re registering on Rotterdam, they went out of their way to say that they would maintain the two main listings, in London and Rotterdam. Membership of the FTSE100 is outside of their control but I would expect them to lobby to be kept in it although I do not know what the FTSE rules are. I do not think it is just a matter of paying a fee...

I've looked it up. I think the ftse100 inclusion may be possible, but would involve extra costs they have chosen not to incur.

4.0 Security Inclusion Criteria
4.1 Eligible Securities
4.1.1 Only Premium Listed Equity Shares, as defined by the Financial Conduct Authority in its Listing Rules Sourcebook, which have been admitted to trading to the London Stock Exchange with a Sterling denominated price on SETS are eligible for inclusion in the FTSE UK Index Series.

http://www.ftse.com/products/downloads/ ... Series.pdf

premium listing
(a) in relation to equity shares (other than those of a closed-ended investment fund or of an open-ended investment company), means a listing where the issuer is required to comply with those requirements in LR 6 (Additional requirements for premium listing (commercial company)) and the other requirements in the listing rules that are expressed to apply to such securities with a premium listing;

https://www.handbook.fca.org.uk/handboo ... G2673.html

Presumably the costs of meeting the LR6 requirements are one factor in choosing not to qualify for the ftse100.

[Dod101]

Surely the cost would not be an issue but I see in the papers Bree has kindly highlighted that an adherence to the UK Takeover Rules is cited as a requirement amongst many others. The reports on Unilever's move all talk of the much stricter takeover rules in Holland than in the UK so that may be a factor, in fact Holland apparently has the right to block any takeover.

TJH. It seems that the place of incorporation is not in itself a disqualifier so I was not right in my guess.

Dod

[OLTB]

Sorry to be thick but is the 4% drop in Unilever today the result of the announcement re FTSE100? I can't see any other RNSs that could affect the price that dramatically. If that is the case, why the drop if the fundamentals of the business haven't changed?

Cheers, OLTB.

[Dod101]

In the Bloomberg report they talk of a muted outlook for sales and a Euro 150 million hit in Brazil as a result of a strike. I think that will have more to do with it than FTSE membership or not.

Dod

[monabri]

150m Euro compared to the free cash flow of 5400m euro in 2017 (from ULVR's webpages) ~ 2.8%

https://www.unilever.com/investor-relat ... -accounts/

I look forward to the next dividend.


p.s. the share price was 3700p at the end of March 18. It's just shy of 4000p even after the drop today.

[Julian]

Sorry to be thick but is the 4% drop in Unilever today the result of the announcement re FTSE100? I can't see any other RNSs that could affect the price that dramatically. If that is the case, why the drop if the fundamentals of the business haven't changed?

Cheers, OLTB.

Presumably if/when ULVR drops out of the FTSE100 all physical FTSE100 trackers will need to sell their entire holdings of ULVR. Maybe the markets are predicting that sell-off and possible glut of shares on the market and be trying to get ahead of the curve? (Posed as a question because I have no idea of the likely effect if any and hence whether my idea might be nonsense.)

- Julian

[Lootman]

Sorry to be thick but is the 4% drop in Unilever today the result of the announcement re FTSE100? I can't see any other RNSs that could affect the price that dramatically. If that is the case, why the drop if the fundamentals of the business haven't changed?

Index funds will have to sell it when it drops out of the index, so I'd guess this is positioning ahead of that. There will be forced sellers.

If it is being added to a different index then there would be buying there to offset it, but the FTSE-100 probably has a lot more money in it than any Dutch or European index. So it's a net negative change due to a permanent lowering of demand for the shares. You might take the view that is a buying opportunity.

[idpickering]

Thank you for your input my learned friends. To be honest, I may well just leave my ULVR holdings alone, they amount for 2.6% in capital value terms of my HYP, so either way, it won't have to much of an effect anyway.

I mentioned me holding off linking TMF items here, but this one does fit the bill nicely;

Breaking news: Unilever could be about to leave the FTSE 100 index

Investing in the stock market is a never-ending challenge. Just when you think you have it all worked out, a new issue arises to keep you on your toes.

Today we have big news that investor favourite Unilever (LSE: ULVR) could be set to leave the FTSE 100 index in the near future.

So what does this mean for investors and what are the implications for your portfolio?

https://www.fool.co.uk/investing/2018/0 ... 100-index/

[moorfield]

Presumably if/when ULVR drops out of the FTSE100 all physical FTSE100 trackers will need to sell their entire holdings of ULVR.

Interestingly the Europtop 100 lists includes the PLC shares. I wonder if that would just be flipped to the NV shares.

https://www.dividendmax.com/market-inde ... urotop-100

[Dod101]

I am completely unmoved by the news/speculation on Unilever and have no intention of doing anything. I still think that today's drop has more to do with the reported 'muted outlook for sales' than anything else. We and I have no doubt the institutions have known about the likelihood of Unilever dropping out of the FTSE index since the announcement was made of the move to Rotterdam (or rather the consolidation of the two existing companies in Rotterdam) In fact in Unilever's announcement of these changes back in March they confirmed that the new company can only be a member of one national index and that they were going to discuss with the index providers how they would treat the new company. (Currently it seems that PLC shares are part of the FTSE100 and NV shares in the corresponding Euro index)

In the way of HYPers, I think this is an opportunity to forget it and go back to sleep.

Dod

[PinkDalek]

Looking back at that 15 March 2018 announcement http://www.londonstockexchange.com/exch ... 67544.html, it included (my bold):

Secondly, we are proposing to simplify our corporate structure:

· Unilever intends to simplify from two legal entities, N.V. and PLC, into a single legal entity incorporated in the Netherlands. This reflects the fact that the shares in N.V. account for approximately 55% of the group's combined ordinary share capital 1 , and trade with greater liquidity than PLC shares.
· Unilever will continue to be listed in London, Amsterdam and New York. …

We will seek a premium listing on the London Stock Exchange, and listings on Euronext in Amsterdam and on the New York Stock Exchange. ...

We are conscious that a number of investors currently invest in Unilever PLC or N.V. due to their respective membership in indices. Currently only the proportion of Unilever's value represented by PLC is included in the UK indices and only that represented by N.V. is included in the Eurozone indices. After simplification, any index in which Unilever is represented will reflect the full value of the Group, but Unilever may be designated under only one index nationality. We will commence discussions with the major index providers to determine how they would treat Unilever on completion of the proposed, simplified Group structure.

[Dod101]

Yes PD it was from that statement that I made my comments. The point is that they are today holding a consumer conference in Paris with Deustche Bank and Bloomberg reports that Unilever said that it is 'extremely unlikely' that they will remain in the FTSE100. They also gave a 'muted outlook' for sales. I am afraid therefore that the March statement does not help very much.

Dod

[NeilW]

I have been asleep regarding Unilever - and Shell

Are we now saying that RDSA shares no longer have withholding tax issues?