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Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Arborbridge
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169529

Postby Arborbridge » September 27th, 2018, 4:04 pm

Dod101 wrote:Apart from the financial arguments about the DWT, the incorporation in the Netherlands, the fact that new shares will be in nominee holdings, and withdrawal from the FTSE100 making it more unbalanced than ever, I also mentioned the national interest in my post no166195 of 13 September.
These points should be enough to make anyone, whether holding Unilever as a HYPer or otherwise, to think very carefully. [Deleted]


Dod


Nominee account: mine already is
withdrawal from the FTSE100 of no consequence to me - might even be a good thing if the price drops so the dividend is "less expensively bought" - something you presumably would cheer on, since you said the opposite about BATs yesterday.
the national interest I do agree here, and I'd like to see UK PLC bolster up its defences in this respect. But I'd rather the Dutch continued to own ULVR than the Amercan asset strippers any day. By the way, about a week ago, weren't you were arguing that takeovers were good for shaking up poor managements, so I think it's inconsistent now to quote defending ULVR on the ground of national interest against being taken over by Johnny Foreigner.
[Deleted]

Arb.
Moderator Message:
Reference to now deleted sentence removed. - Chris

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169531

Postby ayshfm1 » September 27th, 2018, 4:07 pm

Arborbridge wrote:Picking up on Gen's point, I don't believe the argument was mentioned on rdio 4 concerning Dutch law defending better from take over. In any case, I'm pretty sure that on the previous occasion the dual ownership - and the complication of Dutch law - was one significant factor which deterred the predators. Hopefully, that would also be true next time.

Pyad's point is perfectly valid. For a HYPer, what's all the fuss about? - just sleep on it. If the withholding tax does eventually make the share untenable for you, cross that one when you come to it. At present, no one can be certain what the change will bring forth, so there's nothing to do, except vote, if you feel strongly. If you are an active investor or of a nervous disposition, that's a different matter, but I see no reason why a HYPer would do anything at all at present .

Arb.


In this case voting "NO" is doing nothing :D

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169562

Postby Gengulphus » September 27th, 2018, 5:05 pm

pyad wrote:For HYPers why should we care either way? I've held ULVR since forever in my HYP, having managed to grab it on an acceptable yield. Whether it goes Dutch or not won't make any difference to me. It will be the same share, quoted in the UK which is the key point for me.

As a HYPer, I care about the proposed simplification in two ways. The first is very mild: it will add to the administrative burden of my HYP starting from the first dividend paid by the new unified company. Specifically, I will have to separate out the dividends paid by Unilever from all the other dividends paid by my HYP shares (and at present, indeed from all my other dividends) and report them separately in my tax return, since they are foreign dividends.

The second is that it adds to the tax risk of my HYP: if it happens, I become subject to Dutch tax law changes as well as UK tax law changes. I can't do anything about the risk of UK tax law changes short of emigrating, which would be a very drastic step for me, but I have no desire to add extra tax-law-change risk. I think the added risk of Dutch tax law change is only somewhere in the low-to-moderate range, but I don't think it's insignificant.

Together, I'm not certain that those add up to enough to justify the effort and costs of getting out of Unilever and finding alternative homes for the capital. If the meetings on October 26th approve the simplification, I'll have to make that decision. But I would rather not face that decision at all, and the costs of voting against the simplification have proved to be zero so far, while the effort required has been pretty minimal. So voting against it makes sense to me.

pyad wrote:ULVR stated in the doc that no tax will be deducted from divs. Either the company believes this to be true, no doubt having been advised of it, or they are outright lying, or they are spectacularly incompetent. ...

I basically have no doubt that what Unilever has said is either definitely true or given on expert advice and highly likely to be true. But my concerns are about things they haven't said: the small-but-nonzero extra admin involved in my tax return, and the risk of tax law changes. That's not a criticism of Unilever: they're not responsible for HMRC's tax return requirements, and the possibility of tax law changes basically goes beyond the reasonable scope of the scheme document, beyond saying how Dutch tax law is currently expected to change and how they're planning to cope with the situation if that change doesn't happen. The latter sounds likely to be true if it is a simple matter of the Dutch abolition of dividend withholding tax getting cancelled, but I've no faith in that scenario: it seems likely to me that either it will go ahead or it will be cancelled and further changes happen to block the loophole to avoid it that Unilever's plans have exposed / established a precedent for. Just keeping the withholding tax in place and leaving the loophole wide open would be an even-more-than-usually-inept political move...

pyad wrote:... And even if at some time in the future Dutch withholding tax does come in, so what? I can then consider my options.

True, but why should I want to open up the possibility of that happening at some time in the future at all?

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169563

Postby pyad » September 27th, 2018, 5:05 pm

Dod101 wrote:
...pyad incidentally was wrong in his post no 166243 of 14 September when he said that the matter was a foregone conclusion or words to that effect since Unilever would have sounded out the institutional shareholders in advance...


Rubbish, but let's not confuse the argument with facts eh? In any case if you seriously think that the company did not sound out major shareholders beforehand, you cannot know much about how these things are managed. No company would make such a major change without consulting leading shareholders earlier, it would be daft not to.

Dunno why I bother with this, but for the sake of other readers who may have fallen for your comment here's the proof:
A spokesman for Unilever said the company had “engaged extensively” with shareholders over its plans. “We believe the vast majority are fully supportive of the board's proposal,” he said.


from
https://www.telegraph.co.uk/business/20 ... estor/amp/

Arborbridge
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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169568

Postby Arborbridge » September 27th, 2018, 5:24 pm

ayshfm1 wrote:
Arborbridge wrote:Picking up on Gen's point, I don't believe the argument was mentioned on rdio 4 concerning Dutch law defending better from take over. In any case, I'm pretty sure that on the previous occasion the dual ownership - and the complication of Dutch law - was one significant factor which deterred the predators. Hopefully, that would also be true next time.

Pyad's point is perfectly valid. For a HYPer, what's all the fuss about? - just sleep on it. If the withholding tax does eventually make the share untenable for you, cross that one when you come to it. At present, no one can be certain what the change will bring forth, so there's nothing to do, except vote, if you feel strongly. If you are an active investor or of a nervous disposition, that's a different matter, but I see no reason why a HYPer would do anything at all at present .

Arb.


In this case voting "NO" is doing nothing :D


Good point :lol:

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169585

Postby Dod101 » September 27th, 2018, 5:50 pm

pyad wrote:
Dod101 wrote:
...pyad incidentally was wrong in his post no 166243 of 14 September when he said that the matter was a foregone conclusion or words to that effect since Unilever would have sounded out the institutional shareholders in advance...


Rubbish, but let's not confuse the argument with facts eh? In any case if you seriously think that the company did not sound out major shareholders beforehand, you cannot know much about how these things are managed. No company would make such a major change without consulting leading shareholders earlier, it would be daft not to.

Dunno why I bother with this, but for the sake of other readers who may have fallen for your comment here's the proof:
A spokesman for Unilever said the company had “engaged extensively” with shareholders over its plans. “We believe the vast majority are fully supportive of the board's proposal,” he said.


Very gracious of you to respond. Sorry to spoil your snooze. Of course they would have sounded out the institutional shareholders but your conclusion from that was that the result was all sewn up. Well I doubt that it is because they seem to have over looked the small matter of getting approval at the Court meeting.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169589

Postby absolutezero » September 27th, 2018, 6:06 pm

Given the fact I received a letter from Unilever in the post this morning that says
"I would like to take the opportunity to ensure that you have the correct facts about what it means for you as a Unilever shareholder...."

I don't think it is as sewn up as they thought it was.

Ads in the national press plus a letter sent to everyone on the share register strikes me as a worried board.

That's before we get into 'correct facts'.... Whatever they might be.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169590

Postby monabri » September 27th, 2018, 6:23 pm

"A spokesman for Unilever said the company had “engaged extensively” with Dutch shareholders over its plans. “We believe the vast majority are fully supportive of the board's proposal,” he said."

Maybe they forget a word which I have kindly added..... ;)

Moderator Message:
For the avoidance of doubt, Pyad's quote is accurate, and the Telegraph article did *NOT* include the word "Dutch". Not that the poster said it did, but you know how these things get interpreted... -- MDW1954

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169592

Postby Arborbridge » September 27th, 2018, 6:25 pm

Well, whatever the letter says, I've made up my mind and voted against.

I'm not worried about most of the factors rehearsed here, but the one which swings it for me is the withholding tax complication: it may amount to nothing, but given the choice, why would I want to take the risk, small though it is. The big advantage I see in the proposal is the defence against predators - whether this will work again with the split company as it is now as well as it has previously, I do not know but I'll take a punt on it.

If eventually I do lose ULVR to a predator it'll be a sad day, but not a disaster: I can find a better yield which will soften the sadness.

Hyping does tend to get tinged with sadness - I've noticed over the years that you find an excellent company that does the trick, then someone snaffles it from you.

Arb.
Last edited by Arborbridge on September 27th, 2018, 6:27 pm, edited 1 time in total.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169593

Postby vandefrosty » September 27th, 2018, 6:26 pm

This week's Economist is just published and has an article "A dubious tax cut for Dutch multinationals" about the difficulty the Dutch government is facing to abolish the WHT. It shows the growing resentment towards the move in the country and shows there will be growing political opposition to the proposed change. It closes by saying:

If Mr Rutte wants to help the populists, passing a secret**, economically dubious tax cut to benefit foreign shareholders in multinationals seems an excellent way to go about it.

** - inasmuch as it wasn't part of his election manifesto.

The tax isn't a dealbreaker for me, but as an Excluded Shareholder, and quite possibly as a Restricted Overseas Shareholder facing a forced sale, I will be voting no.

Greg

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#169602

Postby scrumpyjack » September 27th, 2018, 7:09 pm

Well they can simplify the structure quite easily by becoming a 100% UK PLC and not have any withholding tax problems.

I don't think there is anything to stop them being a UK PLC and having their HQ in Holland if they want to.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169609

Postby Dod101 » September 27th, 2018, 7:37 pm

A couple of points on the recent posts.

Well done Arb. I am delighted that you have voted against and I hope and expect that most posters here would do so.

To scrumpyjack I would not be so sure that incorporating in the UK would solve that problem (of the DWT) although that is what I would like to see as well. Royal Dutch Shell is incorporated in the UK but is, as Gengulphus kindly pointed out from their Annual Report, resident in the Netherlands for tax purposes and thus liable for the DWT on dividends. I assume that is because it is actually managed from Holland.

We have to recognise that we are dealing with an Anglo Dutch enterprise, and so the tax and other governance issues need to be shared unless that is, we have a takeover, which seems to me to be what the current management of Unilever are aiming for.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169776

Postby StepOne » September 28th, 2018, 11:01 am

Gengulphus wrote:As a HYPer, I care about the proposed simplification in two ways. The first is very mild: it will add to the administrative burden of my HYP starting from the first dividend paid by the new unified company. Specifically, I will have to separate out the dividends paid by Unilever from all the other dividends paid by my HYP shares (and at present, indeed from all my other dividends) and report them separately in my tax return, since they are foreign dividends.


Hi Gengulphus, another minor headache is going to be that GDHYP will need to make a decision about Unilever. It will be excluded from additional top-ups I guess due to being foreign dividends, but I'm not sure if there is anything in the rules about what to do if an existing holding changes to become foreign?

StepOne

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169803

Postby OLTB » September 28th, 2018, 11:51 am

It looks like Legal & General (sixth largest shareholder) will be voting against the move here https://www.ft.com/content/bcaab9e0-c2f ... 6dfef1b89a

Cheers, OLTB.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169819

Postby Dod101 » September 28th, 2018, 12:48 pm

Thanks for that. L & G run a number of trackers I think so it would be nonsense for them to vote in favour. They are a large and surely influential investor. I wonder what the Leverhulme Trust are going to do. They are the second largest shareholder with over 5%.

Incidentally the market value of the Trust's holding at 31 December 2017 was £3,115,471,000 against a historical cost on Budget Day 1965 of £13,562,000. That is a good return surely even if the holding period is more than 52 years. That would have been one way to have got rich.

1965 was the year that James Callaghan, the then Chancellor, introduced CGT, although why that should bother a registered charity I do not know.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169824

Postby Alaric » September 28th, 2018, 12:58 pm

Dod101 wrote:Incidentally the market value of the Trust's holding at 31 December 2017 was £3,115,471,000 against a historical cost on Budget Day 1965 of £13,562,000. That is a good return surely even if the holding period is more than 52 years.


To look at it in a more personal context, if you lop 4 figures off the end, a plausible investment in 1965 would have been £ 1356. That's probably a year's earnings for someone moderately paid. The current value then would be £ 311,547. You've had dividends as well.

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169826

Postby Dod101 » September 28th, 2018, 1:02 pm

The question of course is what would be the value in today's money of the historical cost. In other words, has the increase merely kept pace with living costs or done rather better than that? On the face of it it looks like a good return.

Dod

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169849

Postby Bialystock » September 28th, 2018, 2:01 pm

Of course leaving the UK will stop Corbyn and the Corbynazis from stealing 10% of the company.

The snowflakes and the gullible will vote him in for their free stuff.

Moderator Message:
This post has been reported, but falls a smidgeon short of moderator action. That said, let's not respond to Bialy's bait with further thread drift. There are other places to discuss that particular topic. -- MDW1954

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169938

Postby Gengulphus » September 28th, 2018, 6:54 pm

StepOne wrote:
Gengulphus wrote:As a HYPer, I care about the proposed simplification in two ways. The first is very mild: it will add to the administrative burden of my HYP starting from the first dividend paid by the new unified company. Specifically, I will have to separate out the dividends paid by Unilever from all the other dividends paid by my HYP shares (and at present, indeed from all my other dividends) and report them separately in my tax return, since they are foreign dividends.


Hi Gengulphus, another minor headache is going to be that GDHYP will need to make a decision about Unilever. It will be excluded from additional top-ups I guess due to being foreign dividends, but I'm not sure if there is anything in the rules about what to do if an existing holding changes to become foreign?

It's faced the situation of part of an existing holding becoming foreign twice before, once in 2014 when Vodafone did their major deal with Verizon and returned proceeds to shareholders partly as cash and partly in the form of Verizon shares, and once in 2015 when BHP Billiton demerged South32. On both occasions, I had the company in my main HYP and decided I didn't want the resulting holding of Verizon / South32, so sold it - and sold it from GDHYP as well: as I've said on a fair number of past occasions, I think most recently in my "GDHYP purchase candidate rules/guidance" post (rule C), I do not want GDHYP complicating my tax returns.

If Unilever's simplification doesn't go ahead, there is of course no problem and Unilever stays in GDHYP. If it does go ahead, I'll have a decision to make about whether I keep it in my main HYP. If I decide to sell, the reason for the GDHYP rule will apply and so GDHYP will sell as well. If I don't decide to sell, I'll have a strategy decision to make about GDHYP: should it follow the established GDHYP precedent that when it somehow acquires foreign holdings, it sells them, or should it use my reason for the GDHYP rule to say that a few extra Unilever shares above and beyond those I'm keeping anyway in my main HYP won't add any complication to my tax return that won't be there anyway?

Anyway, I'll cross that bridge if the Unilever simplification goes ahead and I decide to keep the shares in my main HYP, and only when I get to it, which I would guess will be sometime in November (I certainly don't plan to make a snap decision about keeping the shares in my main HYP as soon as the vote result is out. If and when that happens, I'll say something about it in a GDHYP thread - I want to be able to easily locate what I've said later, and over 200 posts deep into this thread is nowhere near being the ideal location! I.e. no point in discussing it now or in this thread - I'm basically just posting this to reassure you that I haven't overlooked the point!

Gengulphus

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Re: Unilever - SIMPLIFICATION OF UNILEVER'S CORPORATE STRUCTURE

#169999

Postby Dod101 » September 29th, 2018, 8:11 am

Now that L & G has come out against the proposals it would suggest that maybe the Unilever management did not do a very good job of sounding out their institutional shareholders beforehand. As I said yesterday I think, L & G is surely an influential shareholder and with each day that passes it seems it reduces the odds of these getting through. Even if they do scrape through, would they go ahead? They may get a majority overall, that is in the aggregate between the two companies (and there seems little reason for the shareholders in NV not to vote in favour) it will be the pesky Brits who have thrown a spanner in the works.

I also see it reported that those private shareholders who hold shares via an ISA say, are not going to have their votes counted according to an article in The Times this morning. Why then are the various managers/nominees acting as though they will? If the managers get a majority of their customers voting against are they going to vote their block accordingly? Can they vote part of their shareholding only? This issue is throwing up a lot of interesting stuff.

Dod


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