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Unilever reveals outcome of strategic review it launched in wake of shock bid move from Kraft Heinz
Anglo-Dutch consumer products giant Unilever PLC (LON:ULVR) (NYSE:UL) today revealed the outcome of the strategic review it launched in February after the shock bid move for the firm by US food group Kraft Heinz Co (NASDAQ:KRFTV).
Kraft withdrew its £115bn bid for Unilever in mid-February after it became increasingly clear that any approach would need to be hostile.
Unilever had thought the 18% premium offered undervalued it and that the two companies’ business models were so different that there would be few synergies from a deal, but was still prompted to investigate ways of appeasing shareholders by boosting value and help fend off any future bid possibilities.
Under UK takeover regulation, Kraft cannot make another approach to Unilever for six months from the date of its bid withdrawal.
Under the strategy plans Unilever confirmed it will sell or demerge its Spreads business, which includes Flora and Stork margarines, and is looking at changing its corporate structure, which comprises legal entities listed in both London and Amsterdam.
WATCH: ETX Capital’s Neil Wilson comments on Unilever moves … READ: Will Unilever’s plans stave off any future takeover moves? …
Aside from the “active portfolio management” moves, Unilever also said it plans to combine its Foods and Refreshment into one organisation, to unlock “growth and faster margin progression.”
The firm said it is to accelerate its “Connected 4 Growth” programme and is targeting a 20% underlying operating margin, before restructuring, by 2020.
Unilever is also establishing a net debt/ EBITDA target of 2x, launching a share buy-back of €5bn this year, and will raise dividends by 12% in the coming year “reflecting increased confidence in the outlook for profit growth and cash generation.”
Value creation …
Paul Polman: the FTSE100-listed firm’s chief executive officer said: “Our recent review concluded once more that our strategy for long-term value creation through growth and compounding returns on investment is the right one for Unilever and for our shareholders.”
He added: “After a long history in Unilever, we have decided that the future of the Spreads business now lies outside the Group. We will look to increase our strategic flexibility for further portfolio optimisation through a review of the dual-headed legal structure, with a view to simplifying it.”
Polman concluded: “For 2017, we remain on track to deliver underlying sales growth ahead of our markets, in the 3-5% range, and we expect an underlying operating margin improvement of at least 80bps.
“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.”
In a note to clients, Shore Capital analyst Darren Shirley said: “We will have to work through the financial implications of the new strategic targets, though we expect the broad based outcome from the review (aggressive margin expansion, disposal of underperforming asset and cash returns) to be taken well by the market and reiterate our buy recommendation on Unilever.”
Story by ProactiveInvestors
Source: http://www.proactiveinvestors.com/companies/news/176098/unilever-reveals-outcome-of-strategic-review-it-launched-in-wake-of-shock-bid-move-from-kraft-heinz-176098.html
