Unilever Shares Rise After Activist Investor Trian Takes Stake

Even before the Glaxo foray—a move criticized by investors and analysts for its price and strategic fit—Unilever Chief Executive

Alan Jope

had been under pressure to boost growth. Unilever’s share price has lagged behind peers over the past year, with the company seen by analysts to have underperformed some rivals during the pandemic in areas such as hygiene and packaged food. The company, which owns Hellmann’s mayonnaise, Axe deodorant and Suave shampoo, has also been criticized for moving too slowly to sell slow-growth businesses.

News of Mr. Peltz’s stake, the size of which couldn’t be learned, is expected to accelerate Unilever’s efforts to improve its performance.

“From Unilever’s perspective, the status quo is not an option,” said Barclays analyst Warren Ackerman. “It would seem that the stars are aligning with both Unilever management and an activist pushing for more urgency.”

Unilever had said it wanted to buy Glaxo’s consumer unit, which houses a raft of drugstore staples from Aquafresh toothpaste to Advil painkillers, as part of a broader effort to push further into health, beauty and hygiene products, at the expense of slower-growing food brands.

The company said any large acquisitions as part of that drive would be accompanied by significant divestitures, and that it was also committed to improving the performance of its existing brands. Unilever also said it plans to announce a reorganization of its operations later this month, aimed at improving its agility and increasing accountability for its different businesses.

Bernstein analyst Bruno Monteyne said investors who think Unilever’s management have underinvested in growth, been slow to rejig the company’s portfolio and been too focused on per-share earnings at the expense of innovating for consumers, “will probably feel relieved” by the arrival of Mr. Peltz. “Board and management renewal is the likely outcome,” he added.

Mr. Monteyne said a new Unilever management team could lower margin targets, providing room to invest in growth. He also said he expects the company to pursue medium-size acquisitions slowly, rather than a “bazooka-style redesign.”

Still, while several analysts and investors have called on Unilever to focus on fixing its core business rather than pursue big deals, Mr. Jope said earlier this month that the Glaxo unit wasn’t the only potential target the company could go after.

Some analysts have suggested Unilever could turn its attention to the consumer-health business of

Johnson & Johnson,

which said last year that it would split off brands such as Band-Aid bandages, Tylenol medicines and Johnson’s Baby Powder. Another potential target, analysts say, could be

Sanofi SA’s

consumer brands, which include Allegra allergy relief, and are being put into a stand-alone unit.

Trian’s acquisition of a stake in Unilever comes a few years after the New York firm took a position in rival consumer goods group

Procter & Gamble Co.

, where Mr. Peltz in 2017 narrowly won a P&G board seat. Analysts have highlighted that P&G’s shares have outperformed the broader S&P 500 index since Mr. Peltz joined its board.

Mr. Peltz has previously served on the board of other consumer goods companies, including Oreos maker

Mondelez International Inc.

and Heinz. In some past activist campaigns, he has sought to break up companies, though that wasn’t a goal in his P&G involvement.

Jefferies analyst Martin Deboo said he expects Mr. Peltz to push for Unilever’s food business to be split from the rest of the company’s portfolio.

Write to Saabira Chaudhuri at [email protected]