LONDON (Reuters Breakingviews) - Unilever may be readying itself for some political maneuvers. The Ben & Jerry’s ice cream owner unveiled a range of measures on Thursday to increase shareholder value and prevent a re-run of Kraft Heinz’s $143 billion hostile takeover approach, which the Anglo-Dutch consumer giant rebuffed in February. The revamp is mostly obvious stuff. But plans to review Unilever’s dual Anglo-Dutch structure offer a cunning way to build a political shield.
It’s hard to fault the logic of picking the low-hanging fruit that made Unilever a target in the first place. Boss Paul Polman plans to tighten up the group’s slack balance sheet and sell the slow-growth spreads division, home to Flora margarine. Adding more leverage, with a target of net debt at two times EBITDA, would generate around 8 billion euros ($8.5 billion) of cash that could be returned to shareholders. A new operating-margin target of 20 percent is reasonable – better than Nestle, but worse than Reckitt Benckiser.
Then there’s the less predictable bit: a review of Unilever’s Anglo-Dutch structure, which entails listings in both countries. When it previously revisited the issue in 2005, Unilever opted for the status quo. Now, Polman is mulling whether simplifying the structure would be less confusing for U.S. investors and remove complexity for future acquisitions.
This could become a clever way of bolstering Unilever’s takeover defences. Polman called in March for an overhaul of Britain’s takeover code to safeguard companies from unwanted bids. That could mean something closer to the Dutch regime, which subjects takeovers to a more stringent stakeholder interest test than the UK does. Dutch paint maker Akzo Nobel has so far successfully used that to fend off a takeover approach from U.S. coatings maker PPG, saying that such a bid would be bad for employees, society and the environment.
Unilever is a big enough employer in both countries to matter to Dutch Prime Minister Mark Rutte and his UK counterpart Theresa May. The Marmite maker can do a lot to protect itself with higher margins, but were a manager determined to avoid a takeover at any cost, a timely review that effectively played host countries against one another might be just the ticket.