Terry Smith launches a new attack on Unilever’s management

Unilever’s top shareholder, Terry Smith, called GSK’s rejected bid for consumer health a “near-death experience” and instead of targeting management for a major acquisition, it’s an existing business. Encouraged to focus on improving.

Julian Robins, founder and head of research at Fundsmith, gave his views Thursday in a broad letter to investors at a £ 29 billion asset management company, a copy of which was viewed by the Financial Times. Was done. In it, they criticize Unilever’s management, strategy, shareholder communication, and “corporate Gibberish trends.”

The letter says: “The response to Unilever’s poor performance was to express a pointless etiquette that is currently trying to add major M & A activities. What could go wrong?”

Unilever’s share price has fallen below its rivals in recent years, slightly below the level it had when the group refused to bid from Kraft Heinz in 2017. Paul Polman, then CEO, described his successful battle against the hostile Kraft Heinz acquisition as a “near-death experience” — comment Smith and Robins echoed Thursday.

“Unilever’s attempt to acquire GSK’s consumer business seems to be thankfully dead, not the value of investing in Unilever,” they wrote in a letter.

Mauritius-based Smith is the candid founder of Fundsmith, and his successful long-term record has helped him gain the support of a large number of retail investors. As of Wednesday, Fundsmith holds a £ 814 million position in Unilever, making it the company’s 13th largest shareholder.

Unilever, a maker of pigeon soap, Hermann mayonnaise and Magnum ice cream, showed on Monday that it is turning its strategy to pursue a major acquisition. However, Smith and Robin’s letter says: .. “

This letter follows Smith’s annual customer responsibility for criticizing Unilever CEO Alan Jope and management for honing their sustainability qualifications at the expense of business operations last week. ..

“Companies that feel the need to clarify the purpose of Hermann’s mayonnaise are clarifying our view. Lost plot, “He wrote.

Unilever’s three bids on Pfizer’s 32% owned GSK unit culminated at the end of last year with most cash offers of £ 50 billion.But that chase was virtually over on Wednesday With statement The company said it would not raise offers beyond its price, which GSK had already rejected.

The turnaround has come as shareholders have begun to go public against the deal. Flossbach von Storch, a top 10 shareholder, told the Financial Times that he was “strongly opposed” to the vote and urged management to abandon the bid.

GSK is preparing to spin off the consumer health sector as a new independent company this year. Smith and Robins questioned why investors shouldn’t just wait for shares in the first public offering because “Unilever will have to pay a control premium for the expected IPO valuation to buy it.” ..

They said Unilever had acted on financial indicators, including the rate of return on capital, but “getting management to discuss what that number was like a dentist pulling out.” Added.

Smith and Robins stopped calling for an immediate change in Unilever’s management, but accused Warren Buffett of acting as the management of’Gin Rummy’. .. .. Discard the least promising cards in each round, hoping they will hand over better cards. “

“They may need to consider whether the problem is with the player / management, not the hand / business,” they added.

Unilever defended an attempt to purchase a unit on Monday. This makes Advil’s painkillers and Centrum’s vitamins a “strong strategic fit.” He said he plans to focus on health, beauty and hygiene through a potential “major acquisition” that involves the sale of slow-growing businesses.

Unilever was one of the bottom five performers in the Fundsmith Equity Fund last year. Overall, the fund rose 22.1% in 2021, the benchmark MSCI World Index rose 22.9% and dividends were reinvested. Since its launch in November 2010, the Fundsmith Equity Fund has recorded an annual profit of 18.6%.

Unilever did not comment immediately.

Terry Smith launches a new attack on Unilever’s management

Source link Terry Smith launches a new attack on Unilever’s management

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