Despite Unilever ruling out any big disposals that has not stopped analysts from continuing to speculate on the possibilities.
The Anglo-Dutch food and personal care company has just hosted a well received investor meeting in Isatanbul, and analyst Martin Deboo at Investec said:
There has been much speculation over the summer and autumn that Unilever are exploring disposals in their foods business. But we felt that chief executive Paul Polman gave a strong signal that the core foods businesses of Knorr and Spreads were not for sale. We do however continue to think that exits are likely in the periphery of the foods portfolio, with sauces and condiments (Colman's, Amora Maille et al) our favoured candidates.
Analysts Martin Dolan and Robert Evans at Espirito Santo went further. They said Unilever now looked as competitive as it had ever been but said its exposure to emerging markets was a key attraction for investors. To focus on this they speculated on some major disposals- despite Unilever's seeming reluctance:
We suggest a spin-out of Unilever's food business – as Unilever defines it. This includes Knorr, Hellmans and all the other brands in Spreads, Savoury and Dressings. These are low growth, mature market dominated (67% of revenues) local businesses with limited opportunity for innovation or to scale innovation.
Spin-outs may be in vogue right now but the shareholders of Cadbury Schweppes, Fortune Brands or Fosters will attest to the value they have created. In this case we believe the real value will accrue from a far keener emphasis on Unilever's world class global personal care business.
We realise that management has categorically ruled out any spin-out strategies in the recent investor seminar. But the purpose of this note is to engage them in a "what if" "discussion. As such we have pushed back on some of the cited synergies for retaining the status quo. If anything the biggest push back that we can see right now is the lack of hard and fast pure financial logic. We can readily, we believe, justify our €28 price target based on a spin-out but anything beyond that requires a pretty chunky multiple on the emerging markets business or some consolidation activity in the global food industry.
Unilever shares are currently 13p higher at £21.25.
