Nelson Peltz seeks more spice from Unilever after foods merger

In the aftermath of Unilever signing a deal with the American spice maker McCormick last month, the share price of the FTSE 100 consumer goods company has fallen by 6%, bringing the total slide to 13% this year. Not the result Nelson Peltz wanted.

Through his fund Trian Partners, the billionaire activist investor (and Brooklyn Beckham’s father-in-law) holds a 1.5% stake in Unilever, which reports first-quarter results on Thursday. Since Peltz took a board seat in 2022, the company has undergone major changes, including:

• the departure of two chief executives and one chair;

• a “productivity programme” of 7,500 job cuts;

• a protracted legal fight with the activist board of its former subsidiary, Ben & Jerry’s;

• the eventual spin-off and listing of its ice-cream business;

• and the $45bn McCormick deal

The share price has risen roughly in line with the FTSE 100, but remains below its 2019 peak.

“This is not over,” says a city adviser who has worked with Trian, adding that Peltz has shown a “relentless” focus on portfolio management and back office costs. So what’s next?

There are a few clues. Less than a week after the McCormick deal, Unilever struck another to acquire Grüns, a US brand selling vitamin gummies. It has been on a buying spree in the beauty and wellness sector, adding to a portfolio that accounts for 65% of the group’s revenue and includes brands such as Dove and Vaseline. Chief executive Fernando Fernandez has been unequivocal that this is  Unilever’s new focus and has put aside £1.5bn a year for bolt-on acquisitions.

Analysts at Jefferies have pointed to a playbook Peltz published in 2014 for the (failed) merger of PepsiCo and Mondelēz, and suggest a similar strategy is being applied: spin off the slow growth division (in Pepsi’s case, beverages) and scale up the rest with a transformational merger (Pepsi’s snack division with Mondelēz). Unilever has yet to execute this second stage. Is Peltz, right, pushing for a merger in consumer health?

For now at least, Fernandez has ruled it out, saying the McCormick deal is not aimed at bringing “optionality to do another transaction. We will not pursue any large-scale or transformational M&A”.

He would say that, especially given Unilever’s history. In 2021, the company’s then-chief executive, Alan Jope, made three bids for Haleon, formerly GSK’s consumer health arm. The £50bn approach was rejected as “fundamentally undervalued”, and Unilever’s shares tumbled. Jope retreated and instead embarked on a restructuring and, within months, Peltz had stepped in.

Analysts say Jope’s strategic rationale still holds, though any deal must wait, pending a clean up in the food aisle. “There's going to be a hunk of stranded overheads from this food separation,” says a source familiar with the company. “Some bloodletting has to be done. You’re starting to cut into real muscle and bone.”

For some, the changes are starting to wear. “When I started in 1990, we had more than 100,000 employees in Europe,” says Hermann Soggeberg, chair of Unilever's European Works Council. “Now we are around 20,000. People are tired of all these ongoing changes.”

A Unilever spokesperson said the McCormick deal would “enhance the group’s structural growth profile, simplify the portfolio and unlock long-term value”, and that it would engage its workers “with care and transparency”. Trian partners declined to comment.

Peltz may be distracted with scaling the family business. According to the FT, his son Matt has built his first public activist stake in Intertek, a FTSE 100-listed testing company that is itself the target of a £9.7bn takeover and is also considering a break up. Welcome to the pugnacious world of UK investing, Peltz Jr.

Photograph by Hollie Adams/Bloomberg via Getty Images