(Bloomberg Opinion) -- Unilever is taking a second bite of the Double Cherry Magnum and attempting to tackle its cumbersome corporate structure once more.
The plan announced on Thursday to combine its U.K. and Dutch arms into a single British parent company has a better chance of succeeding than its botched attempt two years ago to domicile in the Netherlands, for which its former chief executive officer, Paul Polman, and former chairman, Marijn Dekkers, paid the price.
The move by the maker of Dove skincare and Ben & Jerry’s Ice Cream also paves the way for the separation of the foods and refreshment business, a step that Polman’s successor, Alan Jope, could take in an effort to revive Unilever’s flagging appeal to investors. Jope has been criticized for failing to work as quickly as rival Nestle SA to sell flagging brands and energize others. Today he blamed the company’s two-pronged structure for getting in the way.
Why is he likely to succeed where Polman failed? In 2018, the plan to unify Unilever into a single Dutch company was abandoned after opposition from some British shareholders, angry the entity probably wouldn’t have qualified for inclusion in the FTSE-100 Index. Trackers and active funds with a blue-chip mandate would likely have had to sell, effectively giving up their holdings for no premium.
The new proposal, from Jope, a Brit, and Danish chairman Nils Andersen, should get around this problem. Of course, it could face opposition from Dutch investors. But the company is confident the shares will be able to remain a constituent of the Dutch AEX Index too. Some funds tracking the Euro Stoxx 50 may have to sell, but this proportion is expected to be small.
Meanwhile, Unilever looks to have headed off any possible political fallout in the Netherlands. It has already engaged with the Dutch government, agreeing that if the company were ever to list the foods and refreshment business as an independent company, it would do so in the Netherlands.
This acquiescence is not surprising. Unilever has strong roots in the Netherlands and will be keen to minimize the chance of an ugly row. The country also has a more protective takeover regime. The arrangement is a compromise that enables Unilever to achieve its simplification, while giving the Netherlands influence over any future Dutch foods business were it to be separated as a result.
Just the mention of a possible separation of foods and refreshments is significant.
Unilever says the question of a demerger is relevant for its tea business. But the whole of the division, which includes a laundry list of well-known brands such as Magnum ice cream, Hellman’s mayonnaise and Pot Noodle, is the bigger prize. This division could have a market capitalization of 45 billion euros ($51 billion) on its own, Jefferies analyst Martin Deboo estimated in January.
It was surprising that Unilever really missed out during the pandemic-induced panic buying and work-from-home shift in consumer demand. It just didn’t have the right brands or market position to tap into the bulk buying and switch into nostalgia foods that bolstered rivals such as Nestle and Kraft Heinz Foods Co., and it wasn’t in the personal-care categories that took off, such as home hair dye.
Splitting off the foods and refreshment business would see Jope back on the offensive, and potentially breathing fresh life into the Unilever investment story. The new structure would also be more conducive to big acquisitions, enabling him to undertake a bigger portfolio reshaping, as Nestle CEO Mark Schneider has.
But first Jope has to pull off the unification. While Unilever wouldn’t have tried a second time if it didn’t think it could succeed, any unexpected hitch could become a flash point for broader shareholder concerns. With so much riding on the simplification, Jope can’t afford a repeat of Polman’s Dutch debacle.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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