Sector News

Unilever confirms sale of spreads business

April 7, 2017
Consumer Packaged Goods

Chief executive Paul Polman said that the ‘faster pace of change’ that is occurring in the market is challenging Unilever ‘to set the bar higher’

Consumer goods giant Unilever has confirmed that it is selling its spreads business, which includes brands like Flora and Stork butter, in a bid to attract greater returns for shareholders and become more focused.

In a statement on Thursday, chief executive Paul Polman said that the “faster pace of change” that is occurring in the market is challenging Unilever “to set the bar higher”.

He said that the company was striving towards being “a leaner and more focussed business” and that as a result of a strategic review, the decision had been taken that the “future of the spreads business now lies outside the group”.

“We feel confident that the changes we are announcing today will accelerate the transformation of Unilever and the delivery of sustainable shareholder value over the long term,” Mr Polman said.

In February, Kraft Heinz dropped a £115bn ($143bn) offer to buy Unilever after the latter said that the bid was too low and carried no “financial or strategic” merit.

A takeover would have been one of the biggest ever in corporate history, and the biggest ever acquisition of a UK-based company by a non-UK one, Thomson Reuters data showed at the time.

Kraft, which is the world’s fifth-largest food and beverage company, has in recent years already been forced to adjust its product range to consumers’ changing preferences and a trend towards fresher, non-packaged items.

In the wake of the failed takeover, some analysts said that Unilever may shift its focus to do the same, giving it the opportunity to enhance shareholder returns.

But Mark Jones, a food and drink solicitor at Gordons law firm, said that Thursday’s move “is not simply about satisfying shareholders who are unhappy about the business rejecting Kraft Heinz’s takeover bid”.

“The Kraft bid was motivated by the changing consumer market, and Unilever is now making its own moves to adjust,” he said.

“Packaged food growth has been slowing for some time, and while the margarine business remains very profitable, consumers are moving away from the spread in search of healthier alternatives.”

He added that “Unilever has never carried unprofitable brands”.

“One of the reasons it is so successful is because it buys and sell brands at the right time and in this case, parting ways with its margarine division, whilst the going is still good, will enable it to focus on markets which are likely to keep growing in the medium term.”

Also on Thursday, Unilever announced it will launch a €5bn share buy-back programme, and will raise its shareholder dividend by 12 per cent.

The company said that this reflects “increased confidence in the outlook for profit growth and cash generation”.

By Josie Cox

Source: The Independent

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