Top investor castigates Unilever after failed £50bn bid for GSK arm

theguardian.com:

A leading Unilever shareholder has called the company’s failed £50bn offer for GSK’s consumer healthcare division a “near-death experience” and said management should focus on improving its core business – or step down.

Terry Smith, the founder of Fundsmith, lambasted Unilever in a “postmortem” letter to investors in his £29bn asset management business.

The letter comes a day after Unilever said it would not increase its bid for a fourth time, leaving GSK free to float its consumer arm as planned this summer.

“[This is] about a near death experience as it now appears that Unilever’s attempt to purchase the GSK consumer business is now thankfully dead rather than the value of our investment in Unilever,” said the letter, which was co-written by Fundsmith’s head of research, Julian Robins.

Fundsmith is the seventh largest active shareholder in Unilever, the owner of numerous household brands, including Marmite and Dove soap.

In a wide-ranging critique of Unilever and its management, Smith and Robins attacked the company’s long-term performance, accused it of not engaging with shareholders, having a flawed mergers and acquisitions strategy, as well as a “penchant for corporate gobbledegook”.

“Unilever’s performance has been poor,” the letter said. “It is the worst performer by a considerable margin amongst the multinational FMCG [fast-moving consumer goods] companies we have owned and not just in terms of share price but also in terms of sales growth.”

The credit rating agency Fitch on Tuesday said a debt-fuelled purchase of GSK consumer healthcare division could trigger a “multi-notch downgrade” of Unilever’s rating, which could make it more expensive for the company to borrow and force some investors to dump the shares.

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