Two of Unilever’s largest investors have called for a radical shake-up of the company or its board in the wake of its abortive £50bn pursuit of GlaxoSmithKline’s consumer health business.
Bert Flossbach, founder and chief investment officer at Flossbach von Storch, an €80bn Cologne-based asset manager and a top-10 shareholder, said the FTSE 100 consumer group should consider overhauling its structure, which consists of three divisions for beauty, food and household products.
“Unilever should seriously think about splitting the company,” he said. “Talk of synergies between different businesses is usually theoretical and designed to keep the status quo, and smaller than the efficiency gains that you would get from a split.”
Flossbach was previously among those who encouraged German carmaker Daimler to spin off its sprawling truck division from its Mercedes-Benz luxury-car operations, which was completed this week.
“If you’re a food manager, you thinking differently from a household products manager or a beauty manager,” he added. “If you run these businesses under one structure capital allocation can become a problem. And you’re very diverse in a negative sense because you don’t know precisely what you stand for.”
Flossbach said one option could be to keep the food business under the Unilever name and spin off other divisions. “You increase efficiency and enhance the spirit of a company when it has a clearer mission. Cost-cutting is not enough on its own.”
He added: “The best defence against any kind of hostility is a high enough stock price.”
Another top-20 shareholder called for the removal of the Unilever’s chair, Nils Andersen, reflecting concerns that he and the board allowed chief executive Alan Jope to make increasing bids for the GSK division, a potential deal whose size and timing blindsided investors and provoked a backlash.
The top-20 shareholder said a new chair should be appointed from outside the board. He added that a replacement for Andersen could then evaluate both Unilever’s strategy and whether Jope and its chief financial officer Graeme Pitkethly were appropriate for their positions.
Bruno Monteyne, analyst at Bernstein, said: “From the discussions I’ve had with shareholders, I think there would be a lot of people willing to back a credible change for a new chair.”
The continued shareholder discontent increases pressure on Jope and Unilever’s board, weeks after the Financial Times revealed that US activist Trian Partners has built a stake in the company.
While Trian has yet to put forward its case for change, analysts have suggested the activist might push to split the food brands from its larger household products arm.
Last week Unilever announced a reorganisation, cutting 1,500 management positions and subdividing the company into five divisions, including ice cream and nutrition. This could pave the way for spin-offs, according to Jefferies analyst Martin Deboo.
Hermann Soggeberg, chair of Unilever’s European Works Council, said staff had been told that there are no plans for significant disposals, but that Trian’s involvement was a concern for employees who fear a split or more job losses.
The reorganisation announced last week “is a bit as if we have walked in a circle. We are now exactly where we started when I was working here 20 years ago,” he said.
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Analysts and investors are divided on whether a structural overhaul would generate shareholder value, however. The top-20 shareholder said Unilever should focus on improving performance at the existing business before making big portfolio changes, while a top-25 shareholder said: “One thing I worry about is selling off low-growth but cash generative businesses at depressed valuations, then buying more expensive things with more growth, because it doesn’t necessarily create value.”
Andersen, the Danish former chief executive of shipping group Maersk and of brewer Carlsberg, was appointed chair of Unilever in 2019 after four years on the board, shortly after Jope, a veteran of the company, took over as chief executive.
Unilever declined to comment.