Unilever McCormick merger: overview
- Unilever faces backlash over $40bn McCormick megamerger from investors, employees, analysts
- CEO Fernando Fernández publicly defends deal amid change fatigue concerns
- Share price falls, major investor exits, staff criticise handling
- Analysts say Foods division valuation uplift unlikely, following separation
- Outcome signals whether portfolio cuts drive agility or erode profits industrywide
Unilever’s attempts to silence opposition to its $40bn megamerger with McCormick & Company continue to fall short and the strain is starting to show.
Earlier this week, CEO Fernando Fernández was forced to emphatically defend the deal during the annual dbAccess Global Consumer Conference in Paris.
“Some people say, are you under the risk of change fatigue?” he said in reference to the major structural shift. “I’m not paid to be lazy and our people is not paid to be lazy. So we will do whatever has to be done to ensure we make Unilever a consistent outperformer for the years to come. I believe we have proven that in the last three years, and we will continue proving it.”
Fernández’s comments follow weeks of backlash to the proposed plans, including the British manufacturing giant’s share price plunging, an exit of one of its biggest investors, and its own employees publicly stating they’re unhappy with the move and the way it’s been handled.
He went on to say that “neither the board nor the leadership team was prepared to kick the can down the road or leave the issues to be sorted out later.”
However, this still leaves big questions unanswered, as Unilever’s Foods division remains profitable, with Morningstar Europe’s associate equity analyst Svetlana Menshchikova predicting the company will fail to see a significant valuation uplift from the separation, as the Foods business was “not a detraction”.
“It grows more slowly than the remaining home and personal care business, but carries higher operating margins and, we believe, requires less investment to remain competitive,” she explains.
So what “issues” is Fernández referring to? Slowness perhaps?
“Unilever has been perceived as slow and complex for a very long period of time,” says Fernández, indicating that streamlining its portfolio will allow for faster and simpler adaptation to market shifts.
He finished by saying that Unilever “demonstrated” its ability to execute a complex separation when it offloaded its ice cream business and will “prove the same” with Foods.
Unilever’s future
Whether the Foods separation ultimately unlocks value or compounds Unilever’s challenges may take years to judge.
And this is all based on the assumption that the sale goes ahead at all – a detail that remains under close scrutiny in light of the less than positive reception to its announcement.
What is certain, however, is that Unilever’s moves are being closely monitored. Investors, employees and rivals are all watching to see how the company proceeds. And, if the deal does go ahead, whether streamlining delivers the promised speed and simplicity or whether it simply removes a dependable profit engine in pursuit of growth elsewhere.
For the wider food and beverage industry, the results will help define whether radical portfolio cuts become a blueprint for success or a cautionary tale.
Unilever is yet to respond to request for comment on the ongoing merger plans.
