EXCLUSIVE-Investor Artisan Partners backs Unilever's plan to sell food unit

By Richa Naidu

LONDON, March 31 (Reuters) - Artisan Partners, which has a history of driving strategic change at consumer companies, welcomed Unilever's ULVR.L decision on Tuesday to merge its food business with McCormick MKC.N, saying the Dove soap maker should now be able to "more effectively manage" its core personal care and home brands.

"The company will now more logically separate its interests in the food business and the personal care business," David Samra, managing director of Artisan Partners and founding partner of the International Value Group, told Reuters. He said the deal was also tax-efficient and had given shareholders "an attractive sale price."

The merger will create a company worth around $65 billion in the second-largest food transaction in history after Kraft and Heinz's deal in 2015.

Unilever's food unit is a high-margin business, but sales growth has lagged the company's personal goods and beauty businesses and weighed on its ambition to increase overall group sales by 4%-6% in the near term.

Investor pressure on Unilever to shed food brands increased after it was revealed in 2022 that billionaire activist-shareholder Nelson Peltz had built a stake in the company. Peltz has been linked to the departure of former CEOs Alan Jope and Hein Schumacher, with Fernando Fernandez, Unilever's former finance chief and a veteran beauty and wellbeing executive, promoted to CEO to focus on streamlining the company's portfolio.

Artisan has a $1.6 billion stake in Unilever, or 1.22% of the company's shares. It is the British company's ninth-largest investor, according to data from LSEG's Workspace. By comparison, Peltz, a Unilever board member, owns a $1.73 billion stake in the company as its seventh-biggest investor.

"The remaining Unilever businesses operate in faster-growing and highly profitable categories and geographic markets," Samra said, adding: "On a standalone basis, these businesses should be able to command a higher earnings multiple."

Unilever did not immediately respond to a request for comment.

Other investors on Tuesday found the reality of the deal Unilever and McCormick struck hard to digest, perturbed by the transaction's structure, its long timeline to closing and the potential for antitrust scrutiny.

Shares in ‌Unilever, owner of Hellmann's mayonnaise and Knorr stock cubes, fell by 7% after the deal was announced, wiping $7 billion from its market value. McCormick, owner of Cholula hot sauce, also took a hit as its shares slid by about 5%.

Artisan has in recent years advocated for change at several major global companies, from German pharmaceutical giant Bayer to chocolate maker Barry Callebaut. In early 2021, Artisan in an open letter called for change at Danone DANO.PA, saying it had built a stake of more than 3% in the French food giant. About a month later, Danone's then-CEO and chairman, Emmanuel Faber, was ousted and its board overhauled.

More recently, Artisan became the second-largest shareholder in Barry Callebaut with a roughly 10% stake.