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Bill George

Harvard Business School Professor, former Medtronic CEO

Battle for the Soul of Capitalism: Part II

As it promised in February when it rejected Kraft-Heinz’s hostile takeover bid, Unilever today announced a vigorous program of enhancing its long-term shareholder value with a series of aggressive restructuring moves.

In CEO Paul Polman’s announcement, he committed to:

  1. Improve operating margins from 16.4% in 2016 to 20% by 2020.
  2. Increase targeted savings in marketing overhead from $1.2 billion to $2.4 billion per year by 2020 as part of its prior Connected 4 Growth initiative, including consolidation of its Foods and Refreshments business into a single unit based in the Netherlands.
  3. Spin off its declining spreads business.
  4. Improve gross margins by increasing supply chain savings from $3.6 billion to $4.8 billion, including an 80 basis point (0.80%) improvement in 2017 gross margin with underlying sales growth of 3-5%.
  5. Buy back $6 billion of Unilever stock to enhance earnings per share.
  6. Increase cash generation, thereby doubling its free cash flow as % of net profit.
  7. Continue to seek bolt-on acquisitions, such as its 2016 purchase of Dollar Shave Club, including the possibility of acquiring Reckitt Benckiser’s food business.

The stock market has responded favorably to these moves, pushing Unilever stock from $42.57 before the Kraft-Heinz bid to $49.66, up an additional 1.1% on April 5.

Unilever’s strategic and financial decisions illustrate a balanced mix of creating long-term shareholder value while meeting the demands for short-term performance.

Read more from my CNBC article here.