Shares in Unilever (ULVR) rose 1.3% to £46.34 after the consumer goods powerhouse confirmed it is in talks to sell its foods business.
The Dove soap-to-Domestos owner has received an offer for foods from spices-to-sauces maker McCormick (MKC).
While the foods business includes iconic brands like Hellmann’s, Marmite and Knorr, it is now considered non-core. A multi-billion-dollar sale would complete Unilever’s pivot to higher-growth beauty and personal care categories.
Sharpening the focus
Over the past decade, the Anglo-Dutch conglomerate has been pulling back from the slower growing foods industry. Unilever has offloaded its spreads, tea and ice cream divisions.
Since the arrival of new CEO Fernando Fernandez, Unilever has sharpened its focus on faster-growing beauty and personal care brands whist undergoing a major cost-cutting drive.
In December, Unilever completed the demerger of The Magnum Ice Cream Company (MICC). This is now listed as a standalone business in Amsterdam, London and New York. Unilever retains a minority stake in the business.
Food for thought
In today’s statement, Unilever confirmed receipt of an ‘inbound offer’ for foods from Maryland-based McCormick, known for its spice brands as well as Cholula hot sauce.
However, Unilever cautioned ‘there can be no certainty that any transaction will be agreed’.
And just in case a deal fails to materialise, Unilever added:
‘The board believes Foods is a highly attractive business, with a strong financial profile led by market-leading brands in growing categories and is confident in the future of the Foods business as part of Unilever.’
Earlier this week, the FT reported that Unilever had held discussions with Warren Buffett-backed Kraft Heinz (KHC) over a deal possible merger of its food business with Kraft Heinz’s condiments division. This transaction would have created a new foods entity worth billions of dollars.
Slow start
In February, Unilever delivered better-than-expected organic sales growth for Q4. This was driven by strong demand for its Dove, Domestos and Vaseline brands. The FTSE 100 constituent also announced a new €1.5 billion share buyback to start in the second quarter.
Unilever also warned that FY26 growth would be ‘at the bottom end of the underlying sales growth range’ reflecting slower market conditions.
Unilever has been withdrawing from foods for many years now. A sale of the division would enable management to focus on higher margin beauty and personal care products.
Analysts at Jefferies reckon a standalone Unilever food business would be worth between $36 billion and $37 billion, so a sale would strengthen the balance sheet considerably.
The only downside is a slimmed-down, dramatically smaller Unilever could be more vulnerable to a takeover down the tracks.
Read the press release here: https://www.unilever.com/investors/
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