Unilever is expected to face pressure to shake up its business model after it emerged the activist investor Nelson Peltz has built a stake in the troubled FTSE 100 company.
The consumer goods company, best known for Dove soap, Hellmann’s mayonnaise and Marmite, has been thrown into turmoil after a £50bn tilt at GlaxoSmithKline’s consumer healthcare division caused fury among its shareholders.
On Sunday the Financial Times reported that Trian Partners, Peltz’s New York-based hedge fund, had taken a position in the UK group, adding to the problems of its embattled chief executive, Alan Jope.
Martin Deboo, an analyst at investment bank Jefferies, said the “fox would now appear to be inside the henhouse” and predicted a positive share price reaction on Monday morning.
“Trian has a long and successful track record of unlocking value,” said Deboo. “This has frequently centred on splits and spin-outs.”
He added: “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 and household and personal care, via a sale or spin [out].”
The size of Trian’s stake is not known but in the past the hedge fund has taken positions of 1%-3.5% in target companies. Unilever declined to comment. Trian could not be reached for comment.
Deboo pointed to Peltz’s role in the shake-up of the now defunct Cadbury plc more than a decade ago. He prompted the business to split into separate companies, one focused on confectionery and the other on soft drinks. The restructuring led to a listing of the soft drinks arm and the eventual sale of Cadbury to Kraft.
Last week Terry Smith, the founder of Fundsmith and one of Unilever’s top shareholders, described the company’s failed offer for GSK’s consumer healthcare division as a “near-death experience” and said management should focus on improving its core business – or step down.
GSK rejected three Unilever bids for the consumer products arm, the last of which was worth £50bn. However Unilever investors balked at the blockbuster deal and started dumping their shares. The revolt drove its share price down by as much as 11%, however, it regained some ground after Unilever promised not to raise its offer any further.
Smith had already declared that Unilever had “lost the plot” accusing management of burnishing its sustainability credentials at the expense of business performance. He mocked its desire to own brands with “purpose”. “The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert – salads and sandwiches),” said Smith.
The furore saw Jope rush out a strategy update in which he promised to grow its health, beauty and hygiene business and sell slower-growing operations. There is also more change on the way with the company set to unveil a new “operating model that will drive greater agility”.