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Unilever to Buy Back Dutch Shares, Streamline Operations


Unilever Plc UL recently confirmed the buyback of its outstanding Dutch preference shares, through a public offer worth 450 million euros. The company is aiming to simplify its corporate structure through this buyback initiative. The public offering is in connection with Unilever’s agreement to purchase 6% and 7% preference shares in Unilever N.V. held by NN Investment Partners and insurer ASR Netherlands. The offer, which initiated on Oct 11, 2017, will cease on Oct 25.

Simplifying the Corporate Structure

The company has been considering corporate restructuring for its dual-headed legal structure, to make it more agile. To this respect, the purchase of 6% and 7% cumulative preference shares holdings of the company’s Dutch-listed entity, Unilever N.V. UN, is a radical step. As the consumer products giant is listed both in Amsterdam and London, the move will aid the company to improve corporate governance. The review of Unilever N.V.’s corporate structure is expected to be completed by the end of this year.

Other Initiatives to Boost Performance

Unilever has been focusing on strengthening and enhancing efficiency after the failed $143-billion takeover attempt by Kraft Heinz Co KHC. Since then, the company has been undertaking several initiatives to boost shareholder returns and raise its margin target in order to improve performance.

Acquisitions have also been an important growth driver for Unilever. Unilever recently agreed to acquire Brazilian natural and organic food business Mãe Terra. It also clinched a deal to buy cosmetics company Carver Korea for 2.27 billion euros in September. The buyout will place the company in the beauty category which has been witnessing high growth, driven by social media content and diversified professional make-up techniques. Cosmetic companies like Estee Lauder Companies, Inc EL have also been growing significantly, on the back of rising demand for beauty products.

Unilever has been considering moving out of slow-growing business areas. In April, Unilever decided to sell its shrinking spreads business, including brands like Flora and Stork butter. Further, the company announced plans to raise cost-savings target as well as combine foods and refreshments businesses. It also announced the buyout of the Australian ice cream brand Weis.

Investors remain impressed with Unilever’s ongoing initiatives to streamline its business through buybacks, consolidations and acquisitions. Evidently, shares of the company have returned 15.7% in the past 6 months, compared with the industry’s rise of 5.6%.

This Zacks Rank #2 (Buy) company currently carries a VGM Score of A, indicating its inherent strength. You can see see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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