The Unilever [ULVR] share price has fallen more than 6% in the last six months, and on 19 January sank to a five-year low of 3,450p following Unilever’s unsuccessful attempt to buy GlaxoSmithKline’s [GSK] consumer healthcare unit for £50bn.
Since then Unilever has ruled out increasing its bid, cut 1,500 management jobs, restructured its business into five divisions, and faced a barrage of investor criticism. With the company set to report its full-year results on Thursday, the Unilever share price could be in for a bumpy ride.
Unilever share price plunged on failed GSK unit bid
By Wednesday 19 January, the Unilever share price had declined more than 12% compared to the preceding Friday’s closing price, after an investor backlash to Unilever’s third failed bid for GSK’s consumer healthcare unit on Monday 17 January. Having initially hinted that it would continue its pursuit of the business – which includes Aquafresh toothpaste and Panadol painkillers, and is one-third owned by Pfizer [PFE] – Unilever backtracked, saying that it would not increase its bid to meet GSK’s $60bn valuation.
The aborted takeover attempt leaves Unilever and its CEO Alan Jope under increased pressure to improve performance and arrest the slide in the Unilever share price. Investor discontent is rife, with many publicly voicing their opposition to the GSK bid, viewing it as expensive and misguided. Leading shareholders have this week called for Unilever to be broken up on the grounds that its wide-ranging portfolio of businesses encompassing products as diverse as Marmite, Dove shampoo and Magnum ice cream, could make efficiency gains if they were spun off.
Other shareholders are said to be keen on replacing Nils Andersen as Unilever’s chair, in the hope that a boardroom shakeup might breathe new life into the company, while some investors have criticised what they regard as the company’s focus on environmental and social goals at the expense of business fundamentals.
Restructuring plan may not go far enough
Unilever announced in January that it plans to cut 1,500 management jobs globally as part of a wider restructuring plan that also involves dividing the business into five units – beauty and wellbeing, personal care, home care, nutrition, and ice cream.
The announcement came after it emerged that Nelson Peltz’s activist hedge fund Trian Partners had acquired a stake in Unilever. Bosses said that the restructuring plan had long been in the works, but it remains to be seen whether the changes will be sufficient to quell investor dissatisfaction.
The Unilever share price has partly recovered from the low of 19 January – since then, the shares have risen 12%, as of 8 February. However, bosses may be wary of Peltz’s as-yet unstated intentions towards Unilever.
Streamlining the portfolio
Unilever has taken steps in recent years to trim its portfolio of businesses. In late 2017, the company sold its spreads business, including brands such as Flora and I Can’t Believe It’s Not Butter to private equity firm KKR for £6bn. Then, in 2021, Unilever sold its tea business, including PG Tips, to another private equity house, CVC Capital Partners, for £3.8bn.
Alongside these sales, Unilever has also faced steep cost rises which have hit operating margins, though some of the negative impact has been offset by the company raising prices. This was reflected in Unilever’s Q3 numbers, which showed sales up 2.5% year-on-year as prices were increased 4.1%, marking an improvement on its half-year figures.
After an eventful few weeks that have seen failed bids for GSK’s consumer goods business, job cuts, restructuring, and plenty of shareholder ire, Unilever management will be looking to reset the conversation when they announce the company’s fourth-quarter and full-year results on Thursday 10 February.
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