Yahoo Finance Why billionaire activist Nelson Peltz is set to put Unilever in a spin
Nelson Peltz prides himself on not making mistakes often. The feared activist investor has made a living on knowing when to buy into some of the world’s largest companies and pushing for change.
His New-York based hedge fund Trian Partners slips up maybe “every 25 years”. “You can relax,” he jokingly told a conference in late 2019. “For another 22 years, everything’s going to be cool.”
Peltz’s confidence seems to have given Unilever shareholders reason for optimism. Following a week of angst over Unilever’s efforts to buy GlaxoSmithKline’s consumer health brands for an eye-watering £50bn, news that Trian Partners had built a stake in the blue-chip gave hope it could be steered on a more profitable path. On Monday, Unilever’s shares rallied by more than 7pc.
“The fox would now appear to be inside the henhouse,” Jefferies analyst Martin Deboo says. “The force and temperature of debate around Unilever now looks set to rise by several notches, with Trian likely to find a sympathetic audience in the form of apparently disgruntled UK long-only holders of Unilever.”
Investors will be looking to Peltz’s previous campaigns for signs of what may come.
The 79-year-old billionaire has, after all, been in the game of agitating for change at major corporations for some time, with his hedge fund a major activist investor since being founded in 2005.
“Trian has a long and successful track record of unlocking value,” Deboo says. “This has frequently centred on splits and spin-outs.”
It has launched campaigns at the likes of Heinz, Cadbury, Mondelez, PepsiCo and Danone, all sprawling empires where Peltz has seen opportunities for “streamlining” by pooling together production to cut costs, or splitting out entire divisions altogether.
At Cadbury, he campaigned for the business to be split into soft drinks and confectionery, which led to America’s Kraft buying the British chocolate-making unit. He was later a driving force behind splitting Kraft into Kraft Heinz and Mondelez.
And Peltz, worth $1.7bn according to Forbes, has shown no signs of slowing down in his pursuit of turnaround stories. In an interview with CNBC last year, he said he has a different view than “some of these old guys”.
“I’ve got 10 kids,” he said. “Their friends all hang around all the time. I have a different view of life.
“People my age, they say to the wife, ‘Honey, when are we having dinner tonight. Is it gonna be 4 or 4:30.’ That’s not my life.”
Peltz’s youngest child, Nicola, is an actress who is engaged to Brooklyn Beckham. Her siblings include Matthew, a director at Wendy’s, and Brad, a former professional ice hockey player.
In their father’s decades of campaigns, not every chief executive has been enthusiastic about his involvement. For years, Peltz was engaged in a feud with PepsiCo management over repeated calls for it to be broken up into snacks and beverages - something he continued to push for after joining its board.
It has made his relationships with some senior executives fraught. “We’re in battle,” he said of a public row with David Taylor, who recently stepped down as boss of Procter & Gamble - another of his targets.
Taylor and Peltz had been engaged in a bitter proxy battle in 2017 over the latter’s efforts to get a board seat at P&G - something the billionaire was ultimately successful in. Years later, the pair say they have reconciled. “David has been a gentleman throughout the whole thing,” Peltz said in 2019.
“The most important ingredient a CEO needs to have is to be a good listener. Nobody has a monopoly on good ideas. We have an attitude at Trian, we’ll steal any good idea and be proud of it. We’d rather be rich than right, and David has that same attitude.”
Whether Unilever boss Alan Jope will take a similar stance remains to be seen. The Telegraph understands that management were not aware of Trian having taken a stake in before last weekend. The hedge fund does not appear on the company’s shareholder register on Bloomberg - something typical of activist investors, who often hold stakes in a business via financial contracts.
Now aware of its interest, Unilever management may feel under pressure. Shareholder frustration was already on the rise and analysts last week said Jope was at risk of losing his job, with the board’s credibility waning after the GSK offers. Fund manager Terry Smith called the bid a “near-death experience” and said Unilever must fix fundamental problems of its own instead of seeking a mega-deal.
The share price lift on Monday suggests investors are hopeful change could be coming down the line.
For Unilever, the race is on to convince it can deliver a shake-up without being pushed.
Management would argue an overhaul was already on the cards. Early last week it argued the GSK bid was part of a wider strategy change with the aim to sell off some lower-growth food brands and instead focus on its health, hygiene and beauty sectors.
At the end of the week, however, Unilever was clear it wouldn’t be increasing its offer, following what analysts termed a “torrent of criticism from shareholders”. But the plan remains: household staples such as Marmite, Ben & Jerry’s and Knorr’s are all being considered for the chop.
According to analysts, Trian could decide to simply pile pressure on Unilever to deliver this change. At P&G, Barclays’ Warren Ackerman highlights, management was already looking at a redesign of its structure before Peltz took a stake: “his presence acted as an accelerator by bringing a greater sense of urgency to execute than might have been there otherwise”.
P&G shares have risen 85pc since Peltz joined its board in March 2018, outperforming the S&P 500 benchmark, which is up 65pc in the same period.
Still, some suggest a more significant overhaul could be needed. Peltz, after all, is getting involved for a reason. “We think for the stock to be able to outperform on a sustained basis we think it will require a change at the top of the company,” says Ackerman.
Having the activist investor on the register “looks set to further increase the pressure on Jope and the board, who will need to reflect on how and why Unilever has attracted two external, and presumably for them unwelcome, interventions in the past five years: a hostile approach from Kraft Heinz in February 2017 and now this,” adds Deboo.
