Unilever sought to show shareholders it can go it alone on Wednesday after rejecting Kraft Heinz's $143 billion bid, with the promise of a swift, far-reaching review.
This should be completed by early April and could lead to asset sales and cost cuts, a source close to the Anglo-Dutch company said only days after it roundly dismissed Kraft's approach as without financial or strategic merit.
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"The events of the last week have highlighted the need to capture more quickly the value we see in Unilever," the ice cream-to-shampoo producer said in a statement announcing the "comprehensive" review of the business.
The board-led review would include possible mergers or acquisitions and a spin-off of the group's food business would not be excluded, the source close to Unilever said.
Shares in Unilever, which had hit record highs on Friday when Kraft's approach became public, rose 3 percent. This recouped some of the losses that followed Kraft's retreat on Sunday, but was still below the $50 offer price.
Kraft, backed by Warren Buffett and private equity firm 3G, had wanted to buy Unilever, which is being advised by Centerview following the approach, as part of its strategy of buying competitors and cutting costs to drive profits.
Unilever's own profitability has been under scrutiny following weakness in some of the emerging markets where it has developed a strong presence and the group responded on Wednesday by saying it expected its 2017 core operating margin to be towards the upper end of its 40-80 basis points guidance.
Under its Dutch chief executive Paul Polman, Unilever has extolled the virtues of organic growth and focused on "sustainability", but since it rejected Kraft's proposal some shareholders have asked why it spurned the bid and called on the company for reassurance over its growth plans.
Others fund managers are more supportive, including Ketan Patel of EdenTree Investment Management who said:
���As long-term shareholders we welcome the decision by Unilever to reject the bid by Kraft Heinz, which offers very little financial incentive and poses a threat to the sustainability focused business model developed by Unilever's CEO, Paul Polman, since he took over in 2009."
The review is likely to look at the firm's cost base and its structure, including whether there is an advantage in producing food and personal and home care products.
Top of the shopping list for any spin-off could be Unilever's foods business, a second source told Reuters, although a top-30 Unilever shareholder said that would not be an easy fix to the growth conundrum in household and personal care.
"There are some that argue that a sale of some or all food assets is on the cards in exchange for a larger deal in HPC. Unilever would have at least a willing buyer in Kraft. The problem may be what to buy in HPC," the shareholder said
Unilever's London-listed shares were up 4.4 percent at 37.44 pounds ($46.64) at 1502 GMT, just below where they were trading on Friday when news of the Kraft approach broke.
"The shares have delivered total returns of over 12 percent per annum over the past decade, more than double that of the FTSE 100 over the same period,��� EdenTree Investment Management's Patel said on Wednesday.
One of those to buy into the stock following the Kraft bid on an expectation that Unilever would have to react was Henderson Global Investors fund manager John Bennett.
"I think Unilever should use this as an opportunity to reexamine the portfolio and ask itself 'why should it remain a conglomerate of food and consumer and household products'?
"It might have a very good reason to, but it should present those reasons to shareholders," Bennett said.
($1 = 0.8028 pounds)
(Additional reporting by Kate Holton; Editing by Paul Sandle and Alexander Smith)