Unilever (LON: ULVR): Can we see business restructuring in 2022?

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Highlights 

  • There are reports that US-based activist investor Nelson Peltz has bought a stake in Unilever Plc, which might trigger a business restructuring for the consumer goods company.
  • Trian Fund Management LP is reported to have started building its position in the company much before the failed takeover bid of GSK Plc’s consumer healthcare division.

FTSE100 listed Dove soap maker Unilever Plc (LON: ULVR), which recently made a failed £50 billion takeover attempt for GSK Plc’s consumer healthcare division, has been facing strong opposition from its investors. As per some media reports, US-based activist investor Nelson Peltz has bought a stake in Unilever Plc, which might trigger a business model shakeup for the consumer goods company.

Nelson Peltz & his hedge fund

Trian Fund Management LP, the hedge fund managed and run by Nelson Peltz, has previously owned stakes in several FMCG companies like Procter & Gamble Co., Mondelez International Inc. etc. The fund has a successful track record of value unlocking for the businesses through spin-offs and splits of the business division.

Nelson Peltz played a crucial role in the successful split of Cadbury Plc into two key divisions. One focused on confectionery and the other on soft drinks, which unlocked value for the business. In the case of Procter & Gamble, Peltz’s fund played a pivotal role in business reorganization, which helped the company sell its products at premium prices and offset the impact of rising commodity prices and intense competition.

The size of the hedge funds stake in Unilever Plc is still not disclosed. However, the fund is reported to have started to build its position in the company much before the failed takeover bid. As per its previous few positions in target companies, the fund might have taken a 1% to 3.5% stake in Unilever Plc, though it is not officially confirmed.

Unilever Plc facing Investor backlash

The company’s stock has underperformed its peers in recent years. In the last three years, the stock has given negative returns to shareholders amid a sales slowdown and lack of innovative product launches.

As a result, it has been facing criticism from investors as shareholders feel the company should focus on turning around its core business and existing product categories to jump-start its sales growth rather than going for another takeover. Also, the company has a mixed record with limited success on previous other big acquisitions.

What should the investors do in such a situation?

The key update about the stake purchase and business model restructuring could be announced in the coming days. However, the primary purpose of these activities is to put the business back on the growth trajectory and create value for the shareholders. Nevertheless, any news regarding business split or spin-off can make stock price volatile in the short to medium term.

Stock performance

Image source: Refinitiv

Unilever Plc has made a strong start, hovering at GBX 3,859.50 on 24 January 2022 at 8:45 AM BST, up by 5.02%. The share price that had been down by over 6.5% since the start of the new year has recovered most of the losses with this development. Its current market cap stands at £94,115 million, while its dividend yield is at 4.1%as of date.


 

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