Unilever plots its escape
AMERICAN investors were less than impressed with the ruthless speed that Paul Polman and Unilever dispatched Kraft Heinz when they came a- calling with a £115bn bid last month.
A survey by research house Bernstein reported by the FT found that some 53pc of shareholders felt it was all a matter of money, and had the premium offered by Kraft Heinz been 40pc above Unilever’s share price, instead of a mere 19pc, it should have been all systems go. Fortunately, 60pc of British investors felt differently.
The truth is that too many fund managers are obsessed with short-term performance – for reasons of remuneration and survival – and find it harder to focus on the longerterm or the broader economic and public interest. As a guest at a Jupiter investment evening earlier this week, I was struck by the mocking tone of a fund management guru when he referred to the profits and sales forecasts made by AstraZeneca at the time of Pfizer’s bid as ‘being in la-la land’. Sure, they may have been a shade upbeat, but that is not surprising. We have great companies such as Rolls-Royce which deliver four or five profit warnings in short order. Predictions of a post-referendum disaster, like so many forecasts, proved wrong. What is more important about AstraZeneca is the concentration of research and development in Cambridge, advances it is making in immunology treatments for cancer (potential blockbusters) and the enormous strides it is making in emerging markets such as China where it is number two in pharmaceuticals.
All of which is more valuable than an earnings sugar-rush.
Which brings us to Unilever, a company with heritage in the UK and a research, development and testing budget of £250m a year. This would have never survived an onslaught by Brazilian cost-cutting billionaires. Similarly, Unilever’s art deco head- quarters in Blackfriars, and all the vital business services provided to it, would have been endangered, and 88,000 UK pensioners placed at risk.
Polman, rightly, is promising investors a quickie business review. But he is ready to resist short-term demands to do the splits and sell great brands such as Marmite.
Instead, the goal is to speed up the modernisation programme Connected 4 Growth launched last year, bringing forward projected savings of €1bn (£860bn). Big mergers and takeovers are off the agenda, but high margin, innovative bolt-on deals such as razor-blade firm Dollar Shave Club are part of the plan. The idea is to use branding skills and e-commerce to roll out products to new audiences, particularly in emerging markets such as India where Unilever is well established. Investors, no doubt, will complain that this is not enough.
The group will almost certainly seek to recycle some free cash flows to shareholders in the shape of buybacks and/or special dividends. Rightly it is standing firm for Britain and refuses to forget its roots. Hopefully, the get-rich-quick brigade will be repulsed.
Double bubble
QUITE a day for comebacks. ‘Safari’ Bob Diamond is back in the beating heart of the City with his bid for that fading but vener- ated old-line stockbroker, Panmure Gordon, home to David Cameron’s forebears.
When Diamond first arrived at BZW it too was a diminished Square Mile brand beaten into submission by the arrival of the US investment banks Morgan Stanley, Goldman Sachs et al.
Within a few short years, Barclays Capital rose from the embers to become the only UK-owned investment bank of note.
Bob’s closeness to Qatar, his partners in the Panmure Gordon venture, was revealed in 2008 when he reeled in the Gulf state for a rescue fundraising which kept HM Treasury at bay.
As for the other returnee, it is former chancellor George Osborne masquerading as a newspaper editor. Wonder what compliance mavens at BlackRock think of that?
Greek gods
GREAT opportunity for wannabe policymakers seeking trips to some of the most beautiful islands in the world, healthy Mediterranean food and drinkable wine.
The Council of Economic Advisers in Greece seeks five economists with postgraduate qualifications to restore an economy that has shed 45pc of its GDP and represent the country at the IMF and the eurozone.
My application is already in the post.