Unilever’s Share Price Rallied 5.87% on Spinoff of Ice Cream Unit

The Unilever plc (LON: ULVR) share price rallied 5.87% after it unveiled initiatives to expedite its Growth Action Plan (GAP) by divesting its Ice Cream division and initiating a significant efficiency improvement program.

The company's leadership is committed to refining its focus on a collection of exceptionally superior brands that hold dominant positions in highly desirable markets and boast operational models that complement one another. 

Given the distinctive business model of the Ice Cream segment, Unilever's decision to spin off this division aligns with its ambition to foster growth within the Ice Cream sector and the company at large.

Post-divestiture, Unilever will emerge as a streamlined entity centred around four key business units: beauty and wellbeing, Personal Care, Home Care, and Nutrition. These segments, which share synergistic market approaches and/or research and development, manufacturing, and distribution frameworks, span established and burgeoning markets worldwide.

This strategic move is poised to boost the pace at which Unilever implements its GAP, unveiled in October 2023. The plan's ethos—pursuing a narrower range of activities with enhanced efficiency and impact—aims to bolster Unilever's growth, operational efficiency, and organisational simplicity, thereby elevating the company's performance culture.

Moreover, Unilever plans to refine its portfolio further within these four segments to tap into higher growth potential and expand its global brand presence.

Unilever's governance body is optimistic that Ice Cream's growth prospects will thrive under a new ownership structure, given its unique attributes, such as a specialised supply chain for frozen products, distinct sales channels, seasonal variations, and a higher capital requirement.

This strategic separation is expected to forge a premier entity in the appealing ice cream market, with a portfolio that includes five of the world’s top ten ice cream brands like Wall's, Magnum, and Ben & Jerry's. This portfolio achieved a €7.9 billion turnover in 2023, covering retail and food service sectors globally.

Under its new direction, the Ice Cream division is undergoing substantial operational modifications to enhance its performance, including efficiency improvements, product streamlining, and significant investment in innovation.

As an independent entity, the Ice Cream division will enjoy the flexibility to invest and allocate resources according to its unique strategic objectives, optimising its manufacturing and distribution networks to support its growth and operational strategy.

A demerger is the most probable path for this separation, aiming for a financial structure comparable to other publicly traded entities. Alternative separation methods will be evaluated to ensure shareholder value maximisation.

The separation process will commence immediately, with completion targeted by the end of 2025.

Unilever share price. 

The Unilever share price rallied 5.87% to trade at 4038.3p from Monday’s closing price of 3814.5p.