Doubts are simmering over the spin-off of the ice-cream arm at Unilever as the £95billion giant prepares to unveil its first-quarter trading statement on Thursday.
The consumer goods company faces discontent over plans to hive off the £6 billion ice-cream division as some large investors may become forced sellers if it lists in Amsterdam.
And US activist investor Nelson Peltz may not be appeased by the latest moves to reshape the company. This is despite the retreat from the doctrine of ‘purpose’ – City-speak for woke – announced on Friday.
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The sell-off of the ice-cream division – which includes Magnum, Wall’s and Ben & Jerry’s – aims to enable Unilever to concentrate on its other ‘power’ brands, like Dove soap and Hellmann’s mayonnaise.
But, in a blow to the embattled UK markets, this business may make its stock debut in Amsterdam. Or so Unilever’s CEO Hein Schumacher has intimated in recent days.
Shunning London could inflict further damage on the UK markets which are suffering defections to New York as companies seek higher share valuations.
Ali Mortazavi, boss of E-Therapeutics, a biotech firm leaving for the US, has described the British market as ‘completely broken and closed’. Even Shell has suggested it could prefer Wall Street.
But to date, many managers of major funds that own shares in Unilever, like Fundsmith and Lindsell Train, are yet to push for the ice-cream business to be listed in London.
This is despite the potential threat to the value of their funds’
stakes in all UK-quoted companies if Unilever chooses Amsterdam.
Terry Smith of Fundsmith, a fierce critic of the former management’s woke stance, is not commenting. Others are speaking out.
Chris Beckett, head of equity research at financial planner Quilter Cheviot warned of the risks of a flotation outside the UK. He said: ‘If you list a business that you are spinning off in a market where your investor base is less likely to hold stocks, these investors will look to sell the shares in the company that’s been spun off.
‘Such sales are unlikely to be good for the share price – which may not improve until these investors have made their exit.’
Nick Train of Lindsell Train says the ice-cream sell-off demonstrates the ambition of bosses to maximise the potential of other parts of the Unilever empire.
Ben van Leeuwen, deputy manager of 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 trust that this value will be duly recognised when the separation ultimately occurs at the end of 2025.’
Unilever said in February it was expecting sales growth this year to be within its multi-year range of 3 to 5 per cent. It also announced a £1.3billion share buyback programme for later in the year.
On Thursday analysts will be looking for more improvements in Unilever’s operating margins, with an eye to Peltz’s response. He is head of Trian hedge fund and
Unilever is its largest holding. Following the defeat of his proxy campaign at Walt Disney, 81-yearold Peltz now needs to prove his mettle to Trian investors, who pay high fees for performance.
The combative investor may have won a seat on Unilever’s board. But its shares remain at the same level as when he arrived in January 2022.
Trian investors may have been hoping for rewards similar to those achieved by Peltz at Procter & Gamble, where his pressure for reorganisation yielded a 50 per cent rise in the share price while he was on the board.
It is possible that Peltz could be placated by the spin-off next year of the slow-growing ice-cream business, which also owns the US brands Breyers and Popsicle.
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