Unilever restructuring seen as path to split of food and beverages

06 July 2020 - 12:00 am UTC

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. 
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by Deane McRobie in London, with analytics by William Cain