Unilever’s M&A Options Expand After It Chooses Single U.K. Base

(Bloomberg) -- Unilever plans to consolidate its headquarters in London, shedding its cumbersome Anglo-Dutch structure in an effort to become more agile at mergers and acquisitions.

Here are five scenarios the maker of Dove soap and Magnum ice cream could explore once the unification process is completed at the end of this year.

1. Food and refreshments IPO

In a rare show of transparency in the typically opaque world of corporate disclosures, Unilever said it had assured the Dutch government that any potential initial public offering of its food and refreshments division to create a separate public company would take place in the Netherlands.

Although Chief Executive Officer Alan Jope said on a call with reporters that there were no plans to do so at this time, the company’s disclosure of the parameters of such a process suggests the option has been considered.

The division, which sells more than 19 billion euros ($22 billion) worth of products such as Marmite spread, Knorr stock cubes and Breyers ice cream, has come under strain during the Covid-19 pandemic as lockdowns have cut sales by its business supplying restaurants.

2. Sell or float the tea business

Amid declining demand for black tea, Unilever this year initiated a strategic review of its tea business, which includes brands such as Lipton, PG Tips, Pukka Herbs and T2. Jope said on the call that the consolidation in London would free up the option to pursue an IPO of the tea division, the world’s largest, with about 3 billion euros worth of sales.

Such an opportunity wasn’t available to Unilever’s spreads business at the time of its sale to KKR & Co. three years ago. Jope said the review of the tea business is ongoing with no decisions made on the outcome, which could include a partial or full sale.

3. Transformational M&A

A unified structure would streamline the process of funding a major takeover. There’s been speculation about several possible tie-ups in the past, such as an acquisition of toothpaste giant Colgate-Palmolive Co., which would play to Jope’s expertise in marketing personal-care brands after leading the beauty and personal-care division at Unilever before being named CEO.

Greater scale would help put Unilever beyond the reach of potential acquirers, after it fended off Kraft Heinz Co.’s unwanted approach in 2017.

4. Niche deals

Under previous CEO Paul Polman, Unilever said its takeover strategy focused on spending between 1 billion and 3 billion euros a year on acquisitions of fast-growing upstarts. In recent years, it’s bought subscription razor business Dollar Shave Club and the Vegetarian Butcher, a faux-meat business that now supplies Burger King.

Jope has said the company would pursue fewer deals in the immediate term but was still on the lookout for targets that would accelerate growth. Unilever was among the final bidders for celebrity makeup brand Charlotte Tilbury, which was sold to Puig this month.

5. More asset sales

After divesting the spreads arm and reviewing the tea unit, Unilever could look to cull additional businesses in a targeted fashion.

Jope developed the company’s Prestige division, which has grown to about 600 million euros in annual sales and includes skin-care brands such as Murad and Dermalogica. It would be a logical acquisition target for a cosmetics giant such as Estee Lauder Cos. or L’Oreal SA.

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