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Unilever to buy back $5.3 billion of stock, divest spreads

LiveMint logoLiveMint 06-04-2017 Thomas Mulier

Geneva: Unilever plans to buy back €5 billion euros of stock and divest its spreads business in an effort to boost the share price after fending off a takeover bid by Kraft Heinz Co.

The dividend also will be increased by 12%, the Anglo-Dutch consumer-products giant, which owns Dove soap and Hellmann’s mayonnaise, said Thursday in a statement announcing the results of the strategic review it undertook after the unsolicited takeover offer. The company also raised a cost savings target to €6 billion from €4 billion.

Kraft Heinz withdrew its $143 billion bid in February, two days after it emerged, saying an early leak complicated its plans. Unilever executives pledged to improve returns, though contrasted their long-term approach to creating shareholder value with what they describe as a short-term focus at Kraft-Heinz.

“The review that the board has undertaken has been detailed and comprehensive,” chairman Marijn Dekkers said in the statement. “It has confirmed that our model of long-term shareholder value creation has been successful and remains as valid as ever. The actions we are now going to take are fully supported by the Board.”

The company had turned the spreads business, which includes Flora, Stork, Country Crock and other slow-growing brands, into a separate unit as a prelude to a possible sale.

Unilever had already begun rethinking its operations before the Kraft Heinz approach under a program called “Connected 4 Growth.” To reduce costs it embraced zero-based budgeting, under which individual expenses are reviewed during each accounting period rather than rolled over.

The spreads business will be sold or spun off, the company said. Unilever also will consider simplifying its dual legal structure in which it is both a public limited company in the U.K. and an NV, the Dutch equivalent, in the Netherlands, the company said. Unilever said it’s integrating food and refreshment businesses into a unit to be based in the Netherlands.

Unilever said it expects €3.5 billion of costs over 2017 to 2019 related to the efficiency measures.

The company also set a target for net debt to Ebitda of about 2 times, saying this level will still give it flexibility for acquisitions or returning cash to shareholders. Bloomberg

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