Unilever shareholders have challenged the company's leadership over its planned $44.8bn combination of its food division with US spices firm McCormick, questioning the logic of the complex transaction. The deal, which involves brands such as Hellmann's, Knorr and Marmite, was presented by McCormick chief executive Brendan Foley, who spoke of "maximal adjacency" and "actionable growth levers" to justify the move.
Under the terms, Unilever will receive $15.7bn in cash, with the remainder of the value in shares. Unilever shareholders will end up owning 55% of the enlarged McCormick, while Unilever itself will retain a 10% stake. This marks a departure from previous exits, such as the straightforward sales of the Flora spreads and Lipton tea businesses to private equity, and the ice-cream division's spin-off last year.
Investors are now left holding a significant equity stake in a business that has seen its share price fall by roughly a third over the past 12 months. The food operation being contributed generates annual sales of $12bn, compared with McCormick's $8bn, and has faster recent sales growth of 2.7% versus 2%, alongside superior profit margins of 24% against 17%.
Unilever chief executive Fernando Fernández described the transaction as "another decisive step in sharpening our portfolio", but the market reaction was negative, with Unilever's share price down 7% after the announcement. The deal is intended to sharpen focus on the household goods and beauty divisions, yet the combination of a larger, faster-growing business with a smaller one appears awkward to many investors.
