Unilever Faces Another Takeover Attempt Amid Unhappy Investors

Activist Firm Reportedly Building a Stake Amid Investor Displeasure

Shares of Unilever (UL) rose early Monday as word emerged of an attempted takeover. Activist investment firm Trian Partners has built a stake in the London-based corporation that sells cleaning supplies, food, and personal care items. The report follows Unilever’s called-off bid to purchase GlaxoSmithKline’s (GSK) consumer-healthcare business.

Analysts say Unilever shareholders could be more open to a takeover after the failure to acquire GSK, as many are reportedly unhappy with the company’s leadership. In 2017 it faced a similar takeover attempt from Kraft Heinz (KHC) that failed, and Unilever responded by aggressively cutting costs in an effort to boost net profits. Shareholders have enjoyed 8% returns since then, but that’s around half of what competitors Nestlé (NSRGY) and Procter & Gamble (PG) have delivered.

Analysts Say Restructuring Unilever Could Prove Too Challenging for Outsider

Analysts say both Nestlé and Procter & Gamble were helped by activist investor campaigns while outperforming Unilever recently. Trian Partners has experience here as well, as it was heavily involved in the restructuring of P&G several years ago. Similarly, activist investor Dan Loeb pushed for changes at Nestlé in the summer of 2018 that executives now say has it poised for success.

Still, analysts point out Unilever could be a more challenging situation. For example Unilever may need to sell off assets and fire its CEO — something Trian never faced with P&G. Unilever also rarely moves quickly when divesting from aspects of its portfolio, and investors say slow-growing food brands could cause an extended drain on the bottom line.

Expect Changes for Unilever With or Without Trian Partners

Regardless of what happens with this takeover bid, Wall Street seems to think big changes are coming for Unilever. Analysts say the cost-cutting measures that followed Kraft Heinz’s failed bid will have to be supplemented with sales growth. Unilever may need to expand its spending on research and marketing as a result.

Market observers note inflation could also make Unilever’s turnaround attempt more difficult. A large portion of the company’s sales are in emerging markets such as India and Brazil, where consumers may gravitate toward less expensive brands as purchasing power diminishes. Investors will be closely watching next month’s quarterly earnings report as well as the ongoing takeover attempt from US-based Trian Partners, but analysts don’t seem to expect a rapid turnaround either way.

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