Doubts are being raised over the demerger of Unilever’s ice cream division as the £95bn giant prepares to reveal its first quarter trading report on Thursday.
The consumer goods company is facing discontent over plans to spin off its £6bn ice cream division as some big investors could become forced sellers if it lists in Amsterdam.
And American activist investor Nelson Peltz may not be mollified by the latest moves to reshape the company. This despite the withdrawal of the doctrine of “purpose” (in urban slang, awakening) announced on Friday.
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The group is lowering its green commitments in response to backlash from consumers, politicians and shareholders around the world.
The liquidation of the ice cream division – which includes Magnum, Wall’s and Ben & Jerry’s – is intended to allow Unilever to concentrate on its other “power” brands, such as Dove soap and Hellmann’s mayonnaise.
But in a blow to beleaguered UK markets, the company may make its stock market debut in Amsterdam. Or so Unilever CEO Hein Schumacher has hinted in recent days.
Avoiding London could inflict further damage on UK markets, which are suffering defections to New York as companies seek higher share valuations.
Ali Mortazavi, head of E-Therapeutics, a biotech company leaving for the United States, has described the British market as “completely broken and closed”. Even Shell has suggested it might prefer Wall Street.
But to date, many managers of large funds that own Unilever shares, such as Fundsmith and Lindsell Train, have not yet pushed for the ice cream business to be listed in London.
This despite the potential threat to the value of your funds.
stakes in all UK-listed companies if Unilever chooses Amsterdam.
Fundsmith’s Terry Smith, a fierce critic of the former management’s woke stance, has no comment. Others are talking.
Chris Beckett, head of equity research at financial planner Quilter Cheviot, warned of the risks of an IPO outside the UK. He said: ‘If a demerging company lists in a market where its investor base is less likely to hold shares, these investors will look to sell the shares of the demerging company.
“These sales are unlikely to be good for the share price, which may not improve until these investors are gone.”
Lindsell Train’s Nick Train says the ice cream sell-off demonstrates bosses’ ambition to maximize the potential of other parts of the Unilever empire.
Ben van Leeuwen, deputy manager of the Lindsell Train Global Equity fund, says: ‘For now, we wait to see what the actual separation mechanism will be. But the ice cream segment contains some iconic brands, and we are confident that this value will be duly recognized when the separation finally occurs in late 2025.”
Unilever said in February it expected sales growth this year to be within its multi-year range of 3 to 5 percent. It also announced a £1.3bn share buyback program by the end of the year.
Analysts on Thursday will look for further improvement in Unilever’s operating margins, with an eye on Peltz’s response. He is director of the Trian hedge fund and
Unilever is its largest holding company. Following the defeat of his campaign to represent him at Walt Disney, Peltz, 81, now needs to prove his worth to Trian’s investors, who pay high performance fees.
The combative investor may have landed a seat on Unilever’s board of directors. But his actions remain at the same level as when he arrived in January 2022.
Trian investors may have hoped for rewards similar to those achieved by Peltz at Procter & Gamble, where his push for reorganization produced a 50 percent increase in the stock price while he was on the board.
Peltz may be relented by next year’s spinoff of the slow-growing ice cream business, which also owns the U.S. brands Breyers and Popsicle.