Unilever Reviewing Options for Change After Kraft Bid Fails

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Credit: Michael Nagle/Bloomberg

Unilever, the second-biggest global advertiser, has begun a strategic review of its operations and boosted its profitability forecast following Kraft Heinz Co.'s failed $143 billion takeover proposal.

"The events of the last week have highlighted the need to capture more quickly the value we see in Unilever," the Dove soap marketer said in a brief statement Wednesday. The company said it's conducting "a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders."

While Kraft Heinz dropped its unsolicited approach Sunday, only two days after it surfaced, the review shows that Unilever CEO Paul Polman isn't going back to business as usual but taking steps to boost the company's value in a bid to fend off other unwanted suitors. Unilever said it expects core operating margin improvement for 2017 to be at the upper end of its guidance for an increase of 40 to 80 basis points.

Among options that Unilever is considering is a sale of the spreads subsidiary that's previously been earmarked for possible disposal, a split of the business along personal-care and food lines, or raising the dividend to appease investors who had hoped for a windfall from a takeover, according to two people familiar with the company's thinking, who asked to remain anonymous because the review isn't public.

Unilever "is probably alluding to a number of potential things, a more accelerated and aggressive cost-savings plan or spin-out of some assets," said Martin Deboo, an analyst at Jefferies.

The marketer was already pursuing aggressive cost-cutting efforts, including the adoption of zero-based budgeting, moving more quickly into digital media and trying to make promotion spending with retailers more efficient.

Unilever reduced "brand marketing investment" as a percentage of sales last year by 0.4 percentage points to 14.6%, its first such cut since 2011. Unlike years past, when Unilever put savings from reducing agency fees into media spending, it took the savings to the bottom line.

The company said it expects the review to be completed by early April.

-- Bloomberg News with Ad Age staff

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