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High-profile investor Terry Smith has accused Unilever of misleading him over its divestment strategy and warned that the spin-off of its food business bears “all the hallmarks” of Nelson Peltz, the activist investor who has targeted the group.
The fund manager, who sold out entirely from Unilever a few months ago, said that after the consumer goods group demerged its ice cream division in 2025 he was told by its management that there would be no more disposals in the foreseeable future.
Unilever then in March announced a deal to spin off its food division and combine it with spice maker McCormick that would create a food giant with a combined enterprise value of nearly $66bn.
“Apart from the fact that this flies in the face of what we were told and what we liked about [former CEO] Hein Schumacher’s approach, it has all the hallmarks of Nelson Peltz, the activist investor who is on the board,” Smith wrote in his latest investor update.
A person familiar with the negotiations told the FT in April that Trian, Peltz’s investment firm and a major Unilever shareholder, had been “unbelievably pushy” on the sale of its food business.
“We have seen Nelson in action back to the 1980s. We are not fans of the idea that corporate activity solves fundamental problems. Nor are we fans of boards who listen to activists who are not long-term investors,” Smith added.
The deal has concerned some Unilever shareholders, who are worried about the indebtedness of the new company, which they will partly own and will be run by McCormick’s management team, and the scale of change at the FTSE 100 group after two major deals.
Unilever said the deal “enables a growth-led separation” of its food business “at an attractive valuation, creating two stronger businesses, both positioned to win in their categories”. The company added that the deal was approved unanimously by the board.
Smith, who first invested in Unilever in 2010 and has been a large shareholder until recently, said that his firm knows the management of McCormick well and “we are not convinced they are good enough for the existing business let alone a massively enlarged one”. McCormick declined to comment.
Smith’s comments come as his £12.3bn Fundsmith Equity fund reported a 2.9 per cent drop in value over the first six months of the year, compared with an 11.2 per cent increase in the MSCI World Index and a 1.8 per cent return on cash over this period.
The veteran manager blamed the shift of money to passive index trackers to take advantage of soaring tech stocks as one of the main causes of his underperformance.
“We run open-ended funds, and you can and increasingly have been taking money out, we suspect mostly to join the exodus from active to passive, or possibly to invest in managers who profess that they understand quality better than we do,” Smith wrote.
He added that, as a result, he is “implementing some adaptation in our fund management process”, noting that he has turned over half of the fund’s portfolio in the first six months of the year.
“You should therefore expect that we will be more active in future. I still expect our turnover and its cost to be significantly below that of most active funds, but it may well be higher than our historic average.”
Smith said his fund has also sold, or started exiting, its positions in eyewear company Luxottica, LVMH, Nike and Novo Nordisk among others.
