Peltz’s Unilever fight is easy; winning is harder

By and
3 minute read

Nelson Peltz founding partner of Trian Fund Management LP. speak at the WSJD Live conference in Laguna Beach, California October 25, 2016.

Register now for FREE unlimited access to Reuters.com

NEW YORK, Jan 24 (Reuters Breakingviews) - Nelson Peltz is feeling his consumer goods swagger. The activist investor has taken a stake in Unilever (ULVR.L), Reuters reported on Sunday read more , shortly after leaving the board of U.S. rival Procter & Gamble (PG.N). Unilever’s relative underperformance means other shareholders may be excited to have an activist in their corner. But even if Peltz can exert some influence, winning will prove more of a challenge.

Unilever Chief Executive Alan Jope is under fire after last week’s failed 50-billion-pound bid for GlaxoSmithKline’s (GSK.L) consumer health business triggered a share price slump. Even after a Peltz-inspired bounce on Monday, the $127 billion company’s shares are down 2% in the past three years; P&G shares have risen more than 72% over the same period read more . The European company’s EBITDA margins, at 22%, are far lower than the 26% reported by its American rival, according to Refinitiv.

That makes Unilever a clearer activist target than P&G. The $390 billion U.S. company was not obviously underperforming before Peltz started rocking the boat, and not all shareholders supported him. At one point the proxy vote was so close that P&G triumphantly declared victory only to be overruled a few weeks later. Still, the maker of Gillette razors and Pampers diapers has significantly outperformed rivals since, and Peltz mended fences with CEO David Taylor.

Register now for FREE unlimited access to Reuters.com

If Peltz successfully elbows his way into Unilever’s boardroom, though, the actual work may be more difficult. Separating food brands like Hellmann’s mayonnaise and Ben & Jerry’s ice cream from health and beauty products like Dove soap and Vaseline could unlock some value but would also come with operational and tax costs.

Besides, Unilever’s shortcomings require more than financial engineering. Its personal care and homecare businesses sold less by volume in the third quarter of 2021 than in 2020. Meanwhile the company’s beauty and personal care division – which Jope is eager to expand - was the slowest growing unit by sales in the first nine months of last year. Peltz will find it easier to hold management accountable. Declaring victory will require more elbow grease.

Follow @thereallsl, @dasha_reuters on Twitter

(The authors are Reuters Breakingviews columnists. The opinions expressed are their own.)

CONTEXT NEWS

- Trian Partners, a U.S.-based activist hedge fund run by Nelson Peltz, has built an unspecified stake in consumer goods company Unilever, Reuters reported on Jan. 23.

- In 2017 Trian proposed a shakeup in corporate structure at Unilever's rival Procter & Gamble. Peltz joined the board of the company following a months-long proxy fight. In August 2021 he said he would leave the board.

- Unilever on Jan. 19 ruled out raising its 50-billion-pound bid for GlaxoSmithKline’s consumer health division, which the pharmaceutical giant had rejected. In confirming its bid on Jan. 17, Unilever laid out a strategy to move out of food and refreshments, which it believes have lower growth prospects, while boosting its personal care business.

- Unilever shares were up 7% at 3,931 pence by 1314 GMT on Jan. 24.

Register now for FREE unlimited access to Reuters.com
Column by Lauren Silva Laughlin in New York and Dasha Afanasieva in London. Editing by Peter Thal Larsen and Karen Kwok

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.