Unilever (NYSE:UL) detailed plans to reshape its portfolio around a “pure-play” home and personal care (HPC) business while separating its foods operations through a combination with McCormick, according to comments from CEO Fernando Fernandez and CFO Srini Phatak during a company call.
Shift toward a “pure-play” home and personal care company
Fernandez said the company is “moving towards a pure-play HPC company focused on higher growth categories with a proven sector-leading growth profile,” describing the outcome as “a more focused Unilever and a new global leader in flavor.” He characterized the post-transaction Unilever as a EUR 39 billion HPC business concentrated in four areas—beauty, wellbeing, personal care, and home care—with increased exposure to higher-growth geographies such as the U.S. and India and greater participation in premium and digital channels.
On a pro forma full-year 2025 basis, Fernandez said the reshaped Unilever would target consistent volume growth “around 2%,” gross margins “above 48%,” brand investment “above 18%,” and an operating margin “above 19%,” adding that the company sees “clear headroom to progress over time” versus other focused HPC players.
Foods combination with McCormick framed as a global “flavor powerhouse”
Management described the foods separation as a “growth-led” transaction that would combine Unilever Foods with McCormick to create what Fernandez called a “scaled global flavor powerhouse,” spanning condiments and flavor categories across retail and food service. Fernandez cited brand breadth including “McCormick, Knorr, and Hellmann’s,” alongside “Frank’s, Maille, and Cholula,” and emphasized complementary strengths across geographies and channels, including food service capabilities.
Phatak said that on a pro forma 2025 basis, the combined foods business would have about $20 billion of sales and a 21% operating margin “before synergies.” He added that both businesses had delivered value and volume growth in 2025 and that gross margins in the consumer businesses were “in the mid-40s,” alongside brand and marketing investment he said was “substantially higher than the food peers.”
Transaction structure, valuation, and expected synergies
Phatak said Unilever is using 2025 EBITDA as the basis for comparable valuation multiples, and that the transaction reflects an enterprise value of approximately $45 billion for the Unilever Foods business. He said this equates to a sales multiple of 3.6x and an implied EBITDA multiple of about 13.8x, which he described as in line with Unilever’s current trading multiple and “the most attractive food company valuations.”
Unilever is expected to receive $15.7 billion in cash and 65% of equity in the combined company, Phatak said, adding the transaction is structured as a Reverse Morris Trust intended to be tax-free or tax-efficient in the U.S. He also outlined expected synergies of about $600 million in annual run-rate cost synergies net of investment, with full value expected by the end of year three. Areas cited included procurement, manufacturing, logistics, and SG&A. Phatak said about $100 million of incremental cost and revenue synergies would be reinvested for growth.
In describing ownership, Phatak said Unilever shareholders would own 55% of the diluted combined company through distribution, McCormick shareholders would own 35%, and Unilever would retain a 9.9% stake. The retained stake would be subject to a one-year lock-in period, and Unilever intends to sell it down “in an orderly and considered manner,” expecting any eventual disposal to be tax neutral. Unilever would also have governance rights, including appointing four of 12 board members upon closing.
Timing, separation costs, and capital allocation
The transaction is expected to close by mid-2027, subject to shareholder and regulatory approvals and customary conditions, including Works Council consultation, Phatak said. He noted Unilever expects transitional service agreements for about two to three years in areas such as IT and services, including distribution and logistics in key markets.
Phatak estimated gross “standard cost” related to separation in the range of EUR 400 million to EUR 500 million, to be mitigated with an expected one-off restructuring cost of EUR 500 million incurred over 2027 to 2029. He said Unilever is confident it will “fully mitigate” the standard cost. He also said Unilever does not expect revenue dis-synergies from the foods separation and expects any stranded costs to be spread over multiple years due to transitional service agreements.
Regarding cash deployment, Phatak said the $15.7 billion cash proceeds would be received post-closing and would first be used to reduce net debt to about 2x net debt-to-EBITDA, offset one-time separation and tax costs, and then support investor returns. He referenced a total EUR 6 billion share buyback across 2026 to 2029 (including a previously announced EUR 1.5 billion in 2026). He also reiterated a dividend payout ratio of 60% and said Unilever would continue selective bolt-on acquisitions—particularly in the U.S. and India in premium segments and digitally native brands—while not pursuing large-scale or transformational M&A.
Additional details: shareholder votes, listings, and leverage
Phatak said there is no requirement for a Unilever shareholder vote, while McCormick will need to hold one. He said it is “early to comment” on whether Unilever will do a share consolidation post-closing. For the combined foods company, he said the international headquarters would be based in the Netherlands, while McCormick would continue with a New York listing and pursue a secondary European listing, with a decision on location expected within 90 to 120 days.
Addressing questions about McCormick’s ingredients business, Fernandez said Unilever received reassurance it would not be an issue and that it would be covered during due diligence. On leverage at the combined foods business, Phatak said the level was driven by transaction structure and valuation considerations, and that McCormick has committed financing and plans to bring leverage down over two to three years. Fernandez added that management was discussing a foods business with “around 21%” starting operating margin and cash conversion “in the 100% territory.”
About Unilever (NYSE:UL)
Unilever PLC is a global consumer goods company with roots dating back to the early 20th century, formed from the merger of the British firm Lever Brothers and the Dutch company Margarine Unie. The company develops, manufactures and markets a broad portfolio of branded products in personal care, home care and foods and refreshments. Unilever’s corporate structure and listings reflect its long history in both the United Kingdom and the Netherlands, and it operates at scale across diverse consumer markets worldwide.
Unilever’s business is organized around major product categories—Beauty & Personal Care, Home Care and Foods & Refreshment—and includes numerous well-known consumer brands across those categories.
