Saturday 23 September 2017

Unilever unveils radical shake-up in its battle for independence

The company logo for Unilever is displayed on a screen on the floor of the New York Stock Exchange (NYSE)
The company logo for Unilever is displayed on a screen on the floor of the New York Stock Exchange (NYSE)

Martinne Geller

Unilever will press ahead with a sale of its Flora and Stork spreads business, slash advertising spending by 30pc and pump cash back to shareholders under a radical restructuring unveiled yesterday.

The news rattled markets, sending shares in advertising giant WPP down 4.4pc. Unilever is a major advertising client for WPP, whose Ogilvy & Mather agency makes ads for Dove.

The Anglo Dutch giant is even considering scrapping its historic dual structure of maintaining separate corporations in the UK and the Netherlands to create a single global headquarters.

Unilever promised a multi-billion euro programme of shareholder rewards yesterday after a corporate rethink sparked by a takeover approach from Kraft Heinz, aiming to prove it can generate lucrative returns as an independent company.

Under a restructuring sparked by the rebuffed $143bn US bid, the maker of Dove soap and Knorr soup set out an accelerated cost-saving plan, the sale of its Flora to Stork spreads business - where sales are declining - and a review of its dual-headed Anglo-Dutch structure.

Unilever - one of Europe's biggest blue-chip stocks - called the Kraft episode a "trigger moment" to assess its business, as the global packaged-goods industry faces slowing growth and greater competition.

Irish M&A analysts said disposals by the owner of brands including Lyons Tea and HB Ice-cream are likely to be on a scale out of reach of most Irish consumer businesses.

As well as cutting costs, Unilever will also splash out €5bn on a share buyback and raise its dividend 12pc this year.

Some analysts had speculated it would split into two in a dramatic strategy reversal, but executives said the current strategy was working while needing to be speeded up. "We need to accelerate our plans to unlock further value faster, and this was brought home to us by the events of February," chief executive Paul Polman said.

"There is no doubt that however... opportunistic it (the Kraft approach) was, it did raise expectations," Mr Polman said. "We are absolutely determined to use it as an opportunity to place Unilever on an even stronger footing."

A plan to improve margins will see Unilever's food business combine with the refreshment business, which includes Ben & Jerry's ice cream and Lipton tea.

Unilever executives said their strategy of long-term steady growth had found support in talks they had held with investors including all of the group's top 50 shareholders.

GAM fund manager Ali Miremadi, who manages two worldwide equity funds that are 2.5pc invested in Unilever shares, said the announcement was in line with expectations.

"They're not stretching here, and nor should they. They're in a very strong position and this is hopefully a sign they're going to be a bit leaner and more shareholder-focused," Mr Miremadi said, adding Unilever should be able to deliver the premium Kraft was offering or more over the next four or five years. Unilever's London-listed shares, which hit a record 4,088 pence in recent weeks ahead of the announcement, were up 1.3pc at 3,989p by 10.30 yesterday, beating the FTSE 100. (Reuters)

Irish Independent

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