Having bought themselves breathing space with a climbdown in the £50bn pursuit of GlaxoSmithKline’s consumer arm, Unilever’s embattled management team were soon hit by a figurative train. News that activist investor Nelson Peltz is preparing to shake up the beleaguered business set tongues wagging.
Over the weekend it emerged that Peltz’s activist hedge fund Trian Partners had built a position in the consumer goods group following its effective abandonment of the controversial GSK megadeal.
Peltz has a long history of pushing for bold changes at global food and drink giants, having been instrumental in the break-up of Cadbury Schweppes in 2007 and the creation of Kraft Heinz and Mondelez. Most notably for Unilever, Peltz was one half of a fierce dispute with management at P&G in 2017, which involved the biggest proxy battle in corporate history and him taking a seat on the board.
P&G’s shares jumped more than 40% between March 2018, when Peltz took his board seat, and August 2021, when he stepped down as the company acceded to his demands to simplify its corporate structure.
Unilever shares soared by 7.3% on Monday after the news broke to 3,943.5p, entirely wiping out the previous week’s share price plunge on concerns around the GSK bid.
Jefferies analyst Martin Deboo argued Trian was likely to increase pressure to spin off Unilever’s lower-growth food division.
“We have long been of the view that the right path to unlock value at Unilever is via a faster rate of disposals from its slow-growing foods businesses, or a separation between foods & HPC, via a sale or spin,” Deboo said. “We think that Trian might take a similar view.”
He also suggested the move “looks set to further increase the pressure on CEO Alan Jope and the board, who will need to reflect on how and why Unilever has attracted two external interventions in the past five years”.
However, Barclays’ analyst Warren Ackerman suggested investors hoping for a dramatic shake-up of Unilever’s management may be overestimating Peltz’s thirst for radical change. “Whether Trian will be seeking management change is not clear, but that wasn’t the case at P&G and it may not be the case at Unilever either. Peltz tends to like to help from the inside and assisting the current management team by occupying a board seat rather than agitating for change from the outside.”
Bernstein’s Bruno Monteyne cautioned that investor expectations may be inflated. “The first reaction of the Trian stake, will probably be one of relief… but then the inevitable pain of a bad quarter is likely to follow, reminding investors that it will take years to find out whether any new change plan is working.”
Unilever shares remain 12% down year on year and almost 16% down since Covid hit the markets in February 2020.