Unilever Launches Review After Rejecting Kraft Heinz Offer--3rd Update

By Saabira Chaudhuri 

LONDON-- Unilever PLC Chief Executive Paul Polman moved to appease investors days after rejecting a $143 billion acquisition offer from Kraft Heinz Co., saying the consumer-goods giant would review options to wring out more value for shareholders.

The review, to be led by Unilever's board, will be completed in April, the company said in a statement Wednesday. "The events of the last week have highlighted the need to capture more quickly the value we see in Unilever," it said.

Unilever shares jumped 5.7% to GBP37.91 ($47.28) in London trading, bringing them close to their GBP37.97 close on Friday after the Kraft Heinz approach became public.

Unilever is expected to consider an array of options. It could divest its spreads business, which houses its struggling margarine brands, or its entire food arm, which includes products such as Knorr soup cubes and Hellmann's mayonnaise.

Kraft Heinz could be a likely buyer for the food arm, according to analysts. Under Mr. Polman, Unilever has been shifting for years toward higher-growth personal- and home-care products and away from food.

The Anglo-Dutch company also has long been rumored to be a natural buyer for Colgate-Palmolive Co. or Edgewell Personal Care Co., both companies that would enhance its exposure to higher-margin personal-care products.

Unilever declined to comment on specific actions it might take.

Investor pressure also could spur the company to return more money to shareholders through a rare special dividend or a share buyback.

Mr. Polman has avoided buying back shares, a practice he sees as financial engineering, according to analysts. Unilever's last share buyback was in 2007, while its last special dividend was in 1999.

"The Bunsen burner has been turned up near the heels of the Unilever CEO, " said a large investor, adding that a string of macroeconomic events has pressured sales lately, frustrating investor hopes for stronger revenue and margin growth.

Unilever's shares had fallen 11% between October and Kraft's approach last week. The investor suggested Unilever also could look to boost its regular dividend.

Separately on Wednesday, Unilever said margin growth for 2017 would now be at the upper end of its prior guidance, which called for an improvement of 0.4 to 0.8 percentage point.

Unilever's shares have more than doubled between January 2009, when Mr. Polman became CEO, and Thursday, before Kraft's approach was made public.

But Unilever's total shareholder return of 193% during that period, according to Exane BNP Paribas data, is short of those at other European home- and personal-care companies: 464% at Henkel AG, 290% at Reckitt Benckiser Group PLC and 215% at L'Oréal SA.

Unilever's profit margins also have lagged behind those of some of its U.S. and European peers.

On Sunday, Kraft Heinz backed away from discussions with Unilever, just a little more than 48 hours after making public an audacious bid that would have combined two of the world's biggest packaged-food companies.

Kraft's withdrawal came after Unilever repeatedly told its suitor the deal didn't make strategic sense given the companies' different portfolios and business models, a person familiar with the matter said at the time.

Ian Walker and Ben Dummett contributed to this article.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

February 22, 2017 18:40 ET (23:40 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.