Unilever plots £33bn colossus

UNILEVER, the giant food to toiletries combine, has launched a review that could lead to the merger of its Dutch and British arms.

It would create a £33 billion group that would rank among the ten biggest on the London stock market.

New co-chairman Patrick Cescau has emailed non-executive directors asking whether they believe a similar move by Shell has ramifications for his own company.

Two weeks ago, Royal Dutch and Shell Transport, which are separately listed in Amsterdam and London, announced they would merge to form a single company with a single management team under chief executive Jeroen van der Veer. Significantly, he is also a nonexecutive director at Unilever.

Though Unilever recently simplified its structure by creating a board of executives and non-executives, it still consists of two separate companies, each with an executive chairman, Cescau and Antony Burgmans.

The British operation is worth £14 billion and the Dutch arm is valued at £19 billion. While the merged group would be quoted in London, it is not clear whether the new headquarters would be in Britain or the Netherlands.

Unilever has not been criticised as fiercely as Shell for its cumbersome boardroom structure, but it has disappointed investors with a substantial period of underperformance.

And with the departure of Niall FitzGerald, the City heavyweight who has headed the company since 1996, the group, whose brands include Birds Eye, Domestos, Surf and Hellmann's, is seen as vulnerable to pressure for change. Shareholders are pushing for a simpler structure and less bureaucracy.

One major investor said: 'It's like the Civil Service. There are layers and layers of people all holding pointless meetings and making no decisions. Unilever has not had the problems of Shell, but let's hope it doesn't come to that before the company decides to change and speed up its decision making processes.'

Cescau has already warned investors that the company has strayed from FitzGerald's much-vaunted 'path to growth' strategy, which was supposed to refine the group's huge stable of brands and deliver consistently above-average earnings increases. Thirdquarter sales were down by 4% and profits slipped by 2%.

Senior insiders said that if the company did decide to merge its two operating arms, this was unlikely to take place until next year.

One of the problems identified by shareholders is that a new chairman is appointed while the incumbent is still in place.

The newcomer is unlikely to be able to make changes while the more senior man is still around. By the time the successor takes over, he has become too steeped in company culture to retain an appetite for change.