Over the last couple of years, Motley Fool Income Investor selection Unilever
The third and final piece of the restructuring puzzle was to move toward one corporate headquarters and one controlling corporate entity. But in a turn of events that has caught some investors by surprise, the company will not be consolidating its British PLC and Dutch NV corporate structure down to one. However, this isn't a binary decision that the company has made. There will still be some shareholder-friendly changes to the company's structure.
The corporate governance improvements the company announced this morning include: 1) Shareholders will be given the right to nominate candidates to the board of directors, and 2) a one-to-one equivalent value between its two sets of shares (PLC and NV) will be established. But the change I consider most important allows assets to flow more easily between the British and Dutch entities.
The company states that allowing assets to flow more freely between the two legal entities will make it easier to pay dividends and return capital to shareholders in the most efficient manner, which is reasonable enough. The company also argues that maintaining two separate legal entities grants it additional tax flexibility and offers flexibility for investors, as well, by letting them choose between euro- and sterling-denominated shares. This flexibility comes at a cost, but management claims its study shows that the flexibility is worth this costs.
Unilever's shares fell around 2% today, so it's reasonable to assume that the market is not impressed with the company stopping short of consolidating down to one entity. However, I think the biggest flaws in the company have been fixed. There is now one leadership team, a smaller management team, and improved governance in place, which makes Unilever more competitive with Procter & Gamble
As a Unilever shareholder, I must admit that I was initially unhappy to see the headlines this morning. However, having gone through the press release and listened to management's conference call, I intend to wait until the rest of the restructuring information is released to shareholders prior to the company's annual meeting in May. Around that time, I'll make my decision on whether I'll be holding on to my shares or not. For now, I feel comfortable that Unilever has made its most important structural improvements, and that it's worthwhile to wait and see whether these changes bear fruit. In the meantime, I'm still compensated with a healthy dividend yield of more than 3%.
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Unilever PLC is a Motley Fool Income Investor recommendation.
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