Unilever promises cash to shareholders after rebuffing Kraft approach

Tammy Harvey
April 8, 2017

Among the strategic decision to stay independent, Unilever chose to sell the Flora to stork spread business.

Unilever in February rejected a takeover approach by Kraft Heinz, whose brands include Oscar Mayer, Jell-O and Velveeta.

The move comes as part of a wide-ranging review at the Anglo-Dutch firm, which recently saw off a takeover bid from USA food giant Kraft Heinz.

"We need to accelerate our plans to unlock further value, faster", Mr. Polman told reporters.

Unilever added that the restructuring will allow it to aim for an overall underlying operating margin of 20% by 2020, compared to the margin of 16.4% in 2016.

The report also announced that Unilever would be buying back €5bn worth of shares over the remainder of 2017, and that expected sales growth for 2017 remains at 3 - 5% - despite "continued challenging market conditions".

During the weeks since the announcement by Unilever of its review, some financial analysts speculated it would be splitting into two in a big reversal of its strategy, but its executives said that was not possible and repeated rational that more benefits were in having both its personal products and food businesses.

Polman said Unilever was merging food and refreshments into one unit to become "a leaner, more focused business. better able to compete".

The Anglo-Dutch group, which makes everything from Persil washing powder to Wall's ice cream, said the move came after completing a strategic review, following the collapse of Kraft's surprise bid in February.

Analysts had floated an array of actions that Unilever could adopt, including divesting its spreads business, which the company says faces a challenging market, or its entire food arm.

Amid the restructuring, Unilever said it will review its "dual-headed legal structure" in both the United Kingdom and the Netherlands, in order to "create greater optionality for future strategic portfolio change", while accelerating the active management of its portfolio through bolt-on acquisitions and disposals. The company said it expects 3.5 billion euros of costs over 2017 to 2019 related to the efficiency measures. Unilever also plans to borrow more, setting a target for net debt to earnings before interest, taxation, depreciation and amortization of about two times, saying this level will give it flexibility for acquisitions or returning cash to shareholders.

It would launch a share buyback this year of 5 billion euros having not had a buyback program in place since 2008.

"The recent review has shown us that it can add complexity to structural portfolio change", Pitkethly said.

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