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VEB, the Dutch shareowners association, may push Unilever to build “a more focused portfolio” through divestments, according to a source at the association.
This action could follow a clarification process in six to 12 months, whereby VEB would ask management to explain its strategy for the listed Anglo-Dutch consumer goods company, the source said.
Seeking the creation of shareholder value, VEB will also pursue two changes in corporate governance, the source said. First, the association will encourage management to externally recruit its new chief financial officer (CFO) and other board members, who may be willing to revamp the company. Secondly, VEB will seek a change to the administrative structure of the Unilever Group.
“We are still very critical of Unilever” in terms of its shareholder value creation record, the source said, even if “[chief executive officer Patrick] Cescau’s One Unilever program ... has borne fruit, here and there,” the source said.
VEB does not understand why Unilever continues to focus on home and personal care products on one hand and food on the other, the source said: “We can’t see what the synergies are.”
Unilever, he said, argues that combining these foci allows it, first, to economise through pooled advertising and, secondly, to strengthen its position as a purchaser vis-à-vis distributors.
The source disputed this assertion. Reckitt Benckiser and Danone, he said, manage to do the same with a more focused portfolio. “It is possible ... that in the foreseeable future” VEB will therefore ask for a more focused portfolio.
“It is quite possible that in six months to a year, we will question [management] on strategy ... we want a clear explanation,” the source said.
Another issue of corporate governance, the source said, is finding a new CFO for the company. A new CFO, the source said, must “with an open mind, [examine] the situation.” Unilever would do well to appoint an external candidate for this purpose, the source said. “Cescau [came] from within Unilever,” the source said, but an external candidate could bring the required synergies and portfolio rationalisation.
Reacting to reports that Jan Bennink - departing CEO of Numico, who oversaw the Dutch nutrition company’s acquisition by Danone - could join Unilever’s management, the source said he does not expect this to happen “in the short run.”
Overall, however, “it would be a good idea to have [a person such as Bennink] on the board,” given the latter’s “more progressive” track record.
Furthermore, VEB is keen on changing the administrative structure of Unilever, the listed Dutch entity. At the moment, the source said, the Foundation Unilever Trust Office controls a majority of votes in Unilever. ”The Trust ... tends to toe the management line,” he said. Given that both London-listed Unilever PLC and Unilever NV can block a decision taken by shareholders in the other, this means management can effectively block any decisions made in London, he explained.
Earlier, a Dutch investor source told this news service that VEB chairman Peter Paul de Vries had been persuaded to give management two to three years to prove its worth instead of immediately pursuing an activist course.
The source at VEB said he was unaware of any such agreement.
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