Unilever and Intu

“The FTSE 100 took another tumble this morning as reports of an imminent breakthrough on Brexit helped lift sterling ahead of the key US non-farm payrolls release out this afternoon,” says AJ Bell Investment Director Russ Mould.

Unilever

“Today’s climbdown from Unilever over a plan which would have necessitated its exit from the FTSE 100 is an example of the power institutional investors can wield when they act in concert with one another.

“Retail investors were likely to have had some sway too given the fragmented nature of the shareholder base. Notably of the AJ Bell Youinvest customers with Unilever shares who had so far voted on the deal, 93% voted against the move.

“This brings into the question the credibility of Unilever’s insistence that the vast majority of shareholders were ‘fully supportive’ of its proposals ahead of the vote deadline in the UK and the Netherlands later this month.

“Abandoning its dual UK-Dutch stock market listing and moving its HQ to Rotterdam would have made Unilever, one of the London market’s leading lights, ineligible for the FTSE and many institutions complained they would have been forced sellers of the shares.

“The episode looks to have been badly mis-managed and the position of chief executive Paul Polman and the rest of the board is likely to come under severe scrutiny.

“The company now says it is considering its next steps, one option might be to do what fellow Anglo-Dutch firm RELX did in abandoning a dual share structure but keeping the London PLC listing.

“In principle the rationale behind Unilever’s proposals made sense, simplifying the share structure would, for example, have made it easier to use equity in takeover deals. However, whether the current management will be able to push through an alternative is open to question.

“Uprooting to Rotterdam also had clear political sensitivities given it was timed to take place before the UK’s looming exit from the EU, coincidental or not.

“The news will therefore be greeted with relief in Number 10 and some frustration in the Netherlands which had been looking to introduce tax changes to pave the way for Unilever’s move.”

Intu

“The precipitous decline in the share price of shopping centre investor Intu had made it vulnerable to a takeover and a consortium has responded with a preliminary approach which could lead to a cash bid.

“The three parties involved in the prospective offer are interesting. They include Peel, which already owns nearly 30% of Intu, one of the world’s largest owners of real estate in Canada’s Brookfield and Saudi Arabian vehicle The Olayan Group.

“The deadline for an offer to be made is 5pm on 1 November so shareholders do not have too long to wait and many may consider a cash bid an attractive exit.

“Intu is struggling thanks to the structural changes in the retail market, where more and more sales are moving online, and its heavy debts.

“Already jilted at the alter by Hammerson in April, shareholders will likely be hoping there is no repeat this time around.

“The news helps lift a depressed REIT sector with the likes of Land Securities, British Land and Intu’s main lookalike on the London market, Hammerson, all enjoying share price gains.

“Whether these can be sustained may depend on updates due from British Land and Land Securities next month.”

These articles are for information purposes only and are not a personal recommendation or advice.