ALEX BRUMMER: Peltz gives Jope a jolt, but stakeholders should be careful what they wish for
No one could accuse Unilever chairman Nils Andersen of being ageist. The invitation to 79-year-old American activist Nelson Peltz to become a non-executive director of Britain’s biggest and most established fast moving consumer group smacks of desperation.
If everyone who had a 1.5 per cent stake in the UK’s top companies were to be invited on to the board, it would give a whole new meaning to shareholder democracy.
Unilever is not able to say whether the Peltz stake is held in actual shares through his vehicle Trian. That would be the case with a long holder such as a pension fund.
Unilever’s shares have struggled since CEO Alan Jope’s bold and much disparaged move to buy GlaxoSmithKline’s health care offshoot Haleon earlier this year
Instead many activists choose to build their stakes through derivatives thereby avoiding payments of stamp duty to HMRC.
The most recent parallel of an activist being invited into a top FTSE 100 tent was in 2016 when Bradley Singer of ValueAct was added to the Rolls-Royce board.
Singer exited without much fanfare in 2019, which was just as well as the aero-engine giant faced a near existential crisis in the pandemic that followed.
It is hardly an act of supreme confidence in the strategy of chief executive Alan Jope to think that Unilever has something to learn from a collaborative relationship with Peltz.
Unilever’s shares have struggled since Jope’s bold and much disparaged move to buy GlaxoSmithKline’s health care offshoot Haleon earlier this year.
The deal was scuppered by unsavoury leaks, but in retrospect Unilever’s proposition to double down on healthcare made sense, and the £50bn offer would have saved Emma Walmsley at GSK the costly burden of doing the splits.
The fact that Nestle was also frightened off as suitor suggests that the failed embryonic bid was not without merit.
Much is being made of the wondrous talents that Peltz brought to the Procter & Gamble board during his sojourn there.
Peltz was the nation’s very own ‘barbarian at the gate’ who dismantled that best loved of companies, Cadbury Schweppes
Yet it could be argued that Unilever had already embarked on necessary reforms with a management restructuring and shedding 1,500 jobs.
It has also decisively moved more into beauty and fast growing healthcare brands. In the process it has disposed of tired food offers, selling spreads such as Flora in 2017 and more recently tea.
Peltz, one supposes, could be helpful in tidying up the brand portfolio. But lord help him if he should suggest it is time to sell that emblematic favourite Marmite.
All of the talk of Peltz and co-operation is fine and maybe in his dotage, with his daughter ostentatiously married off to a Beckham, a kinder gentler activist has emerged.
However, British consumers and investors should never forget that Peltz was the nation’s very own ‘barbarian at the gate’ who dismantled that best loved of companies, Cadbury Schweppes.
He instigated the sale of soft drinks arm Schweppes. Then, with a helping hand from Irene Rosenfeld, then of Kraft, engineered the fall of Cadbury, which was sold to Kraft in a £11.5billion deal in 2010.
Pledges by Kraft not to close plants in Britain were abandoned and production of the Wispa bar shifted to Poland.
Cadbury was bundled together with other confectionary brands under the Mondelez label. Along with the deal came desecration with a change in dairy content of Cadbury’s milk chocolate, an alteration in the formula for Creme Eggs and a botched attempt to create a range of products combining Kraft’s cream cheese with chocolate.
After those assaults came shrinkage in the size of products.
Unilever, its board and stakeholders should be careful what they wish for. Peltz could fashion a business with a purpose into a real Horlicks.
B&M has been among the standout retailers since it was acquired by Simon and Bobby Arora in 2004.
Under the family stewardship, the value shopping chain expanded from 21 stores to 1,100 and earnings soared.
The aftermath of the pandemic has seen it suffer from supply chain kinks and like much of UK retail, it is being hurt by the squeeze on margins.
One of the most difficult tasks for family-controlled enterprises is putting in place a succession plan. With Simon Arora stepping back as chief executive, finance director Alex Russo is to take the helm. A warning about profit margins saw 15pc wiped off an already weakened share price.
For value retailers like B&M the squeeze on household incomes might well offer an opportunity. Everyone loves a good deal.