Unilever is the latest company to see its stock price jump on news of an activist investor taking a stake in the consumer goods maker. Activist investors have made waves recently with their unorthodox approach, which has some questioning whether it’s time for other companies to enter into such arrangements.
Nelson Peltz, a hedge fund manager and activist investor, has bought a stake in Unilever. The company is the world’s third-largest food company.
According to people familiar with the matter, Trian Fund Management LP, the activist hedge fund run by Nelson Peltz, has purchased a stake in Unilever UL -0.18 percent PLC, adding pressure to the packaged food and consumer goods giant following its failed $68 billion bid for GlaxoSmithKline GSK 0.49 percent PLC’s consumer-health business.
It was impossible to determine the size of the stake. One of the persons claimed Trian began purchasing Unilever shares even before their bids for the GSK subsidiary appeared earlier this month.
Unilever’s stock has been under pressure in recent months due to its inability to increase volume. Analysts believe it outperformed other competitors during the Covid-19 epidemic in sectors like cleanliness and packaged food, and it hasn’t released any game-changing products in a long time.
Investors were outspoken in their opposition to the company’s proposal to purchase GSK’s healthcare division, with analysts pointing to the company’s uneven track record with prior large acquisitions. Critics said that the London-based firm would overpay for the GSK business and that it should instead concentrate on turning around its current categories rather than pursuing new ones in which it lacked expertise.
The Financial Times has previously reported on Trian’s interest in Unilever.
Late last year, Unilever CEO Alan Jope launched a bid to purchase GSK’s consumer health unit, which the company has announced it plans to split off. The transaction would be part of Unilever’s attempt to expand into health, beauty, and hygiene goods at the price of slower-growing food businesses, according to the company. Unilever’s largest strategic move in years was the bid and the shift to health. Any major purchases, it stated at the time, would almost certainly be followed by considerable divestitures.
However, the initiative stalled due to strong resistance from Unilever shareholders, while GSK insisted on a higher price. Previous week, Mr. Jope said that he would not increase Unilever’s last offer, thus putting the sale on hold. Unilever said that it was dedicated to improve the performance of its current brands, including via a planned restructure, as well as diversifying its portfolio into higher-growth areas.
Mr. Jope’s credibility, according to some experts and investors, has suffered a knock as a result of the incident.
Trian’s stake comes a few years after the New York firm bought into Unilever rival Procter & Gamble Co. PG 0.38% Mr. Peltz in 2017 narrowly won a P&G board seat, in what was at the time the most expensive proxy fight in U.S. history.
Mr. Peltz previously has served on the board of other consumer goods companies, including Oreos maker Mondelez International Inc. MDLZ 0.89% and Heinz. In some past activist campaigns, he has sought to break up companies, though that wasn’t a goal in his P&G involvement.
Analysts and investors have called for Unilever to jump-start its own sales growth in a way similar to P&G’s turnaround, including by divesting slower-growing brands and turning around its core business.
P&G at the time of Mr. Peltz’s involvement was struggling with intense competition, rising materials costs and its own bureaucracy. The Cincinnati-based company has since succeeded in upgrading consumers to premium versions of its products. It also shed mass-market beauty brands and led the industry in a move to raise prices to offset commodity costs and fatten profit margins.
More recently, P&G has benefited from big sales gains made through the pandemic, including through higher prices. Mr. Peltz late last year left P&G’s board.
Unilever’s underestimate of investor resistance to the GSK offer has been compared to the Anglo-Dutch conglomerate’s misreading of shareholder support for its attempt to consolidate its headquarters in Rotterdam in 2018. After considerable protest, the business, which had dual headquarters in both New York and London, reversed its decision. Then-CEO Paul Polman stepped down shortly after, handing the reins over to Mr. Jope.
Mr. Jope, a Scotsman, was successful in getting a second corporate restructure passed, which concentrated the company’s headquarters in London. The consolidation was justified in part because it would allow the corporation to be more agile in its deal-making. Unilever executives claim that the company’s dual-structure previously rendered its shares too complicated to be appealing to owners of large firms it was interested in acquiring.
Mr. Jope’s first significant transaction, a combination of stock and cash, would have pushed Unilever into the world’s largest vitamin owner, with names including Centrum and Emergen-C. It would have included Aquafresh toothpaste, Advil pain relievers, Tums indigestion treatment, and Flonase allergy relief, among other pharmacy mainstays.
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Analysts slammed the transaction not just for its $68 billion price tag, but also for Unilever’s lack of expertise in consumer healthcare. Such products are more likely to be regulated, and they can’t be swiftly rolled out across new markets like less-regulated consumer items can.
In recent months, Unilever’s shares have traded close to where they were in 2017, when the firm was the focus of a failed $143 billion hostile offer from Kraft Heinz Co. KHC -0.16 percent.
Critics partly blame the company’s food unit, which houses brands like Ben & Jerry’s ice cream and Hellmann’s mayonnaise. Unilever for years has faced calls to spin off or sell its entire food business. The company in recent years has sold off big chunks of it. In 2018, it sold its spreads unit for about $8 billion, and in November, it struck a roughly $5 billion deal to sell the bulk of its tea business.
Mr. Jope, who previously served as Unilever’s head of personal care before becoming CEO in 2019, has said that Covid-19 has accelerated customers’ already rising interest in health and wellbeing, as well as his desire to expand further into the market.
Trian will likely press Unilever to sell food brands more swiftly, or sell or spin off the business completely, according to Jefferies analyst Martin Deboo. Mr. Deboo said that “the force and intensity of discussion surrounding Unilever now appears poised to grow by several notches,” with Trian likely to find a sympathetic audience among Unilever shareholders, and that the incident would put pressure on Mr. Jope.
Other major consumer products companies like P&G, Reckitt Benckiser Group PLC and Colgate-Palmolive Co. CL 1.00% are mainly focused on businesses like personal care, cleaning and consumer health. Food giant Nestle SA NSRGY 0.46% —in which activist investor Dan Loeb has a stake through his hedge fund Third Point LLC—has exposure to categories viewed as more promising like coffee and pet food.
Cara Lombardo, Saabira Chaudhuri, and Costas Paris may be reached at [email protected], [email protected], and [email protected], respectively.
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Activist investor Nelson Peltz has recently bought a stake in Unilever. This is the latest in a series of moves by Peltz to gain control over the company. Reference: nicola peltz net worth.
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