Unilever restructuring seen as path to split of food and beverages

Unilever’s legal restructuring could clear the way for a split of the company’s food-and-beverages unit, with reasons including the need for growth and the greater ease of large disposals under the new structure, a minority shareholder and a sector banker told this news service.
 
On 11 June, the Anglo-Dutch consumer giant said it would unify as a UK-based entity by merging Unilever PLC and Unilever NV. This news service reported that the simplified group could be a more likely target for takeover bids or activist investors; both could be drawn by the simplicity of targeting a firm listed on a single exchange, bereft of Dutch rules protecting stakeholders. As well, the firm now has “strategic flexibility for … equity-based acquisitions or demergers,” according to the firm’s announcement of the move. 
 
Unilever’s Foods & Refreshment Division accounted for EUR 19.3bn in FY19 sales, or 37% of Unilever’s total, next to 42% for Beauty & Personal Care and 21% for Home Care. Beauty & Personal Care’s turnover grew by 6% in FY19, and Home Care’s by 6.9%, while Foods & Refreshment’s shrank by 4.6%.
 
The shareholder noted Unilever is prioritising growth, as shown by recent changes to its emerging-market accounting methodology – last year adjusting to allow for inflation-driven price growth, capped at 2%, in its measure of organic sales growth in Argentina and Venezuela – as well as by the upcoming sale of its low-growth black-tea brands, which include Liptons and PG Tips. Higher growth figures should help its EV/EBITDA trading multiple (14.3x, Dealreporter analytics show) catch up to those enjoyed by Nestlé (18.1x) and Colgate (16.6x), he said.
 
The new structure would also facilitate a split, the shareholder said, as it gives Unilever more flexibility to shed weight. 
 
To view the full article, please email  Kasia Koslowska.
 
by Deane McRobie in London, with analytics by William Cain