Shares of Unilever (NYSE: UL) are up around 8% this week on news the company offered a board seat to activist investor Nelson Peltz as the embattled giant attempts to remodel its strategy.
Peltz to Become a Board Member
Peltz, CEO and founding partner of the hedge fund Trian, holds a 1.5% stake in Unilever. The activist investor will be joining Unilever as a non-executive director in July and will earn a seat on the board’s compensation committee.
Peltz’s appointment comes as Unilever strives to revamp its strategy following its failed purchase of GlaxoSmithKline’s (GSK) consumer healthcare unit earlier this year.
“We look forward to working collaboratively with management and the Board to help drive Unilever’s strategy, operations, sustainability, and shareholder value,” Peltz said in a statement.
In the past, Peltz has shown interest in several consumer-oriented companies and fought for significant strategic changes at Trian’s portfolio companies.
In January, GSK announced it rejected a $68 billion offer from Unilever for its consumer goods business, arguing that the proposal “fundamentally undervalued” the business and its future outlook. Instead, GSK said it would stick to its initial plan and spin off the business.
Unilever was highly interested in GSK’s arm, saying that the business would mark a solid strategic fit as the company attempts to revamp its portfolio which mainly consists of beauty, food, and home care businesses.
The consumer goods giant dropped its plans to pursue the deal with GSK’s arm later that month, saying it would not hike its $68 billion takeover bid that GSK rejected. The company said in a statement that it “determined that it does not change our view on fundamental value. Accordingly, we will not increase our offer above £50 bln”.
GSK rejected a total of three Unilever bids for its consumer business, which is known as the maker of Panadol painkillers and Sensodyne toothpaste.
Following the failed attempt, UK fund manager Terry Smith slammed Unilever’s unsuccessful bid for GSK Consumer Health, describing the offer as a “near-death experience” and urged the consumer goods company to reinforce its performance.
Smith wrote a letter to investors of his investment management firm Fundsmith, one of the major Unilever shareholders, saying that the London-based company failed to convey the clear benefits of the GSK Consumer Health deal.
“It seems to us that Unilever management’s response to its poor performance has been to utter meaningless platitudes to which it has now attempted to add major M&A activity. What could possibly go wrong?” said the letter.
A few days later, it was reported that Nelson Peltz increased his stake in Unilever, raising the pressure on the consumer goods company. The move came just a few months after stepping down from the board of Unilever’s rival Procter & Gamble, where he also pushed for operational changes as an activist investor.
Unilever announced shortly afterward that it would cut roughly 1,500 management jobs and focus on revamping its business to concentrate on five primary product areas in an effort to spur growth.
Last month, Unilever said it hiked prices by more than 8% in the first fiscal quarter and warned of additional hikes in the future after the company raised its cost inflation forecast for the second half of 2022 following Russia’s invasion of Ukraine.
Unilever said it expected cost inflation of up to $2.8 billion during the period from July to December, almost double its previous outlook of $1.6 billion. The company posted a 1% decline in Q1 sales volumes, raising concerns that this could indicate that consumers were shifting towards cheaper own brands.
Barclays analyst Warren Ackerman said he expects Unilever’s full-year costs to quadruple compared to last year, and that’s why the consumer goods company expects additional price hikes in the future.
Unilever stock price is trading higher this week on news activist investor Nelson Peltz will join the board of the company. Unilever accepted to offer a board seat to Peltz as it tries to improve revenue growth.