Unilever to sell spreads division as part of major overhaul

LONDON — Under pressure after spurning a blockbuster $143-billion takeover offer, Unilever said on Thursday that it would explore the sale of its spreads business, restructure two major divisions and buy back $5.3 billion in stock as it seeks to cut costs and appease investors.

The moves, which include overhauling its food and beverage operations, are meant to reassure investors who had seen the possibility of more grocery store shelf space and cost savings from the takeover bid in February by a fellow food giant, Kraft Heinz.

But Kraft Heinz withdrew its $143billion offer for Unilever, the BritishDutch maker of Dove soap, Ben & Jerry’s ice cream, and Hellmann’s mayonnaise, in the face of public criticism and of resistance from its prospective partner.

Unilever said the plans unveiled on Thursday would potentially unlock billions of dollars in savings and return billions more to shareholders by increasing its dividend 12 per cent. The company also said it would seek to buy back about $5.3 billion in stock.

The changes were announced after a strategic review of the company’s operations, begun in February after the Kraft Heinz bid was withdrawn.

Unilever chief executive Paul Polman said in a news release: “With the transformation of Unilever, we have built on a portfolio of strong and growing brands delivered to consumers across the world.

“The faster pace of change that we are seeing in our markets and competitive set requires us to continue to set the bar higher,” he added.

The company has faced investor pressure to improve profitability, particularly in light of the dropped Kraft Heinz deal.

Polman said that combining the two segments would lead to a leaner business “that will continue to benefit from our global scale and footprint.”

The spreads business, which includes the margarine brands Country Crock, Flora and I Can’t Believe It’s Not Butter, was merged two years ago with a baking and cooking segment in Unilever’s foods division. The company said it had achieved modest growth in sales of its spreads in emerging markets last year, but this was not enough to offset continued declines in developed markets, and it would seek to sell or separate the business.

The spreads business, which had 3 billion euros in sales last year, does not include Hellmann’s mayonnaise or Marmite.

“After a long history in Unilever, we have decided that the future of the spreads business now lies outside the group,” Polman said.

Overall, Unilever said it expected to achieve annual cost savings of 4 billion to 6 billion euros through the initiatives announced Thursday along with previously announced cost cutting.

In February, Kraft Heinz made a takeover offer for Unilever, hoping to create a packaged food and consumer goods giant.

But Kraft Heinz’s board — including Warren Buffett and the Brazilianborn billionaire Jorge Paulo Lemann — withdrew the offer less than 48 hours later as it faced a potentially lengthy fight for Unilever.

Unilever said then that the Kraft Heinz offer “fundamentally undervalues” the company. Later, it said the bid “highlighted the need to capture more quickly the value we see in Unilever.”