Unilever Launches Review After Rejecting Kraft Heinz Offer--Update
February 22 2017 - 10:04AM
Dow Jones News
By Ian Walker
LONDON -- Unilever PLC Chief Executive Paul Polman moved to
appease investors days after rejecting a $143 billion acquisition
offer from Kraft Heinz Co., saying the consumer-goods giant would
review options to wring out more value for shareholders.
The review, to be led by Unilever's board, will be completed in
April, the company said in a brief statement Wednesday. "The events
of the last week have highlighted the need to capture more quickly
the value we see in Unilever," it said.
Unilever shares were up 3.1% to GBP36.98 ($46.12) in afternoon
trading in London. The shares closed at GBP37.97 on Friday after a
13% boost on news of Kraft Heinz's interest.
Unilever is expected to consider an array of options. It could
divest its spreads business, based on slow-selling margarines, or
its entire food arm, which includes brands like Knorr soup cubes
and Hellmann's mayonnaise. Kraft Heinz could be a likely buyer for
the food arm, according to analysts. Under Mr. Polman, Unilever has
been shifting for years toward higher-growth personal- and
home-care products and away from food.
The Anglo-Dutch company has also long been rumored to be a
natural buyer for Colgate-Palmolive Co. or Edgewell Personal Care
Co., both companies that would enhance its exposure to
higher-margin personal-care products.
Investor pressure could now also spur the company to return more
money to shareholders through a rare special dividend or a share
buyback. Mr. Polman has stayed away from buying back shares, a
practice he sees as financial engineering, according to analysts.
Unilever's last share buyback was in 2007, while its last special
dividend was in 1999.
"The Bunsen burner has been turned up near the heels of the
Unilever CEO, " said a large investor, adding that a string of
macroeconomic events has pressured sales lately, frustrating
investor hopes for stronger revenue and margin growth. Unilever's
shares had fallen 11% between October and Kraft's approach last
week.
Separately on Wednesday, Unilever said margin growth for 2017
would now be at the upper end of its prior guidance, which called
for an improvement of 0.4 to 0.8 percentage point.
Unilever's shares have more than doubled between January 2009,
when Mr. Polman became CEO, and Thursday, before Kraft's approach
was made public. But Unilever's total shareholder return of 193%
over that period, according to Exane BNP Paribas data, is short of
those at other European home- and personal-care companies: 464% at
Henkel AG, 290% at Reckitt Benckiser Group PLC and 215% at L'Oréal
SA. Unilever's profit margins also have lagged behind those of some
of its U.S. and European peers.
On Sunday, Kraft Heinz backed away from discussions with
Unilever, just a little more than 48 hours after making public an
audacious bid that would have combined two of the world's biggest
packaged-food companies.
Kraft's withdrawal came after Unilever repeatedly told its
suitor the deal didn't make strategic sense given the companies'
different portfolios and business models, a person familiar with
the matter said at the time.
--Ian Walker and Ben Dummett contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
February 22, 2017 09:49 ET (14:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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