Could Unilever’s personal care unit dominate alone?

Could Unilever’s personal care unit dominate alone?

Following the bid for a Unilever takeover by Kraft Heinz last month, Unilever is undergoing a comprehensive internal review. We take a look at the case for splitting up its business units, and whether personal care could dominate alone.

Bloomberg notes that splitting up Unilever’s food and personal care businesses would in fact create two companies that would be among the biggest in those industries respectively, with Unilever’s food unit having sales almost equal to Kraft Heinz’s.

When it comes to personal care, Unilever is similarly formidable, particularly as a result of its decisive strategy of acquisitions over the recent period: nine of the company’s last 10 deals were in home and personal care, looking to capture higher growth and profits. Its personal care unit is reportedly enjoying growth of 4.2%.

Standing alone, Bloomberg reports, Unilever’s personal care unit will have sales equal to about half that of Procter & Gamble Co. and more than twice that of Colgate.

Background analysis

While the company’s food division is a dominant force in its sector, growth in the personal care and home care unit has far outstripped that of food and refreshments in the recent period.

Indeed, a report from Food Dive suggests that “top investors sat the food unit is dragging down the larger company’s profits.”

A split could mean that another Kraft Heinz deal could be brokered focused on the food side of Unilever’s business, although the move poses risks.

If the company is broken apart, the food segment could become a valuable acquisition for a CPG company — including Kraft Heinz,” the Food Dive report speculates.

But speculation is also growing over a number of other major multinational companies that could be potential suitors, with investors particularly eyeing Colgate-Palmolive, which is focused on personal care but is largely focused on oral care, where Unilever only has limited exposure.

Not as simple as it seems

Due to its nature as a multinational corporation, commentators have observed that a split of the units may not prove easy.

European investors may lose out: according to Food Dive, as both British and Dutch investors are entitled to tax credits for investing in Unilever, they could face higher taxes were the divisions split.

Both the food and personal care industries now await the results of the strategic review with interest: the company expects it to be completed by early April.

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