A “bargain basement Britain” is no mere exaggeration conjured by fears over what looms on the other side of Brexit.
As Unilever boss Paul Polman warned last month, the threat of hostile takeovers that often slash jobs and shutter factories is very real indeed, as companies whose profit is built on short-term cost-cutting pounce to take advantage of the UK’s now exceptionally weak pound and even weaker takeover laws.
Unilever, which owns a host of beloved British brands such as Marmite, PG Tips and Colman’s, only just averted the same fate as Cadbury after Kraft Heinz put in a bid to take over the consumer products giant in February.
The acquisition didn’t go through but it prompted Unilever to make hard and fast changes to appease shareholders and head off any future predatory takeover. Among these changes was to last week offload its profitable and popular spreads business, which includes brands such as Flora and Bertolli.
The move has plunged the lives of 200 workers at the Purfleet factory in Essex into uncertainty as jobs are put on the line, prompting Unite to seek urgent assurances over the factory’s future.
Now, Unilever CEO Paul Polman has said he may take an even more drastic step to avoid a hostile takeover – the company, listed both in the UK and in the Netherlands, may elect to delist from the London stock exchange because the UK offers so little protection from predatory buy-outs.
Polman urged the UK government to revise its takeover laws which are among the most lax in the developed world as he prepares to meet business secretary Greg Clark within the next two weeks to press his case.
“That fast money coming in; do they have the same rights as a shareholder that has been with you for a longer period of time? Some countries make distinctions,” he told the Telegraph. “The US has very high protection measures that are put in, that are called ‘poison pills’.
“In the UK, although you have it written that the board needs to protect the interests of a broad range of stakeholders, it is very much shareholder oriented,” he added. “Some other countries have a broader view.
Robust Takeover Commission call
Unite general secretary Len McCluskey joined the call for stronger laws and reiterated a demand Unite has long made for a robust Takeover Commission that ensures the interests of workers and consumers are just as important as those of shareholders in any takeover bid.
“The current protections for UK listed companies from unwelcome buyouts are woeful,” McCluskey said yesterday (April 10). “But with both Brexit and a diminished pound placing our companies in a very vulnerable position, the risk to British jobs and businesses has been heightened.”
This was a point made also made last month by Lord Myners, who served as financial services secretary to the Treasury under Gordon Brown.
He predicted that in the next year alone at least “five or six” of Britain’s biggest publicly listed companies would be the target of takeovers.
He too urged the government to tighten up its takeover laws, noting that “companies are not just assets to be traded” but are “assets to be built up”.
Lord Myners told the BBC Today programme that in most countries besides the UK “there is a public purpose test to ensure that [any corporate] takeover works to the broader benefit of society”.
“Other countries value their listed businesses and act to protect them by demanding that takeovers are assessed for their wider economic, social and employment issues that arise from purchases,” he explained.
“In the Netherlands buyout bids are subject to an assessment of the impact on all stakeholders including customers, the environment and most importantly workers. British workers and communities deserve nothing less.”
If the laws don’t change, UK businesses are at especially high risk under Brexit uncertainty, according to a new KPMG report out last month.
“International buyers emerged as a real force to be reckoned with towards the end of last year, as overseas trade acquirers – most notably those from the US and Asia – acted opportunistically to take advantage of a weakened sterling,” noted Andrew Nicholson, head of mergers & acquisitions at KPMG.
“With no sign of a bounce in the pound on the horizon, and the UK economy continuing to confound post-referendum expectations, UK businesses will remain a target for hungry investors.”
McCluskey highlighted just what happens when a hostile takeover does go through and the government sits idly on the side-lines – we need only look back to 2010 when Cadbury was swallowed up by Kraft Heinz.
He noted that Unite had “campaigned hard for protections when Kraft drove through its bid for Cadbury” but, he added, “the coalition government failed to act then.”
And the results were disastrous.
A Channel 4 Dispatches programme last year examined how Cadbury has fared six years on after the contentious Kraft takeover.
Dispatches highlighted the promise after promise that Kraft Heinz had made – in front of Parliament no less – that it would go on to break not long after it swooped in.
Kraft pledged to keep the Somerdale factory open but only a week later earmarked it for closure, in the process axing hundreds of jobs. The company vowed to keep management of Cadbury brands, assets and the workforce within the UK, but has since migrated major decision making to Switzerland and has outsourced many jobs to cheap labour havens such as Poland.
In the end, after assuring the British people that it would act in the best interests of the historic brand, about 700 direct UK jobs have been lost.
The same cannot happen to Unilever or any other UK company, especially in such uncertain economic times, McCluskey argued.
“When one of our biggest companies, Unilever, considers that it may have to seek haven in the Netherlands because it fears that by remaining listed in the UK it is a sitting duck for predatory hedge funds, surely the government must listen?” he said.
“We need stable ownership of our businesses, with investment in jobs and skills – not the asset-stripping or debt burden that sadly all too often accompanies hostile purchases.
“It is high time that the UK put some protections in place for businesses that want to list and trade in the UK,” he added. “A strong economy needs an active government so we say again to the government, signal that you will support jobs and UK business by establishing a Takeover Commission.
“This government has made much play of having an industrial strategy – well let’s see this is action. Do as other nations do and act to protect our jobs and businesses in these uncertain times.”