Terry Smith, the notable stockpicker behind the £12.5 billion Fundsmith Equity Fund, has divested his substantial holding in Unilever after more than 15 years. His decision stems from Unilever's $45 billion food business deal to merge with US spice giant McCormick. Smith expressed strong disapproval, stating that Unilever "appears to have abandoned its promised operational focus in favour of activist-driven break-ups," and specifically criticized the transfer of its food business to McCormick, a company whose management and returns he does "not rate highly" cityam.com.
The McCormick deal, reportedly spearheaded by activist investor Nelson Peltz (who joined Unilever's board in 2022), triggered an immediate 7% drop in Unilever shares. Investors, including Smith, raised concerns about the significant debt being loaded onto the newly merged entity. Smith also objected to Unilever's use of new listing rules in London to bypass a shareholder vote on the transaction, arguing this overlooked the interests of long-term shareholders cityam.com, thisismoney.co.uk. A Unilever spokesman defended the deal as a "unanimous decision by the board, which believes it is in the best interests of all shareholders" thisismoney.co.uk.
Smith's move is significant, as Fundsmith was one of Unilever's top 10 largest shareholders for over a decade and a half. The combined entity will be one of the largest standalone food groups globally, with Unilever investors owning 65% of the merged company. However, other investors have warned of a potential sell-off if the new entity does not list in London, as many current FTSE 100 shareholders are mandated to invest only in UK-listed companies cityam.com. Smith later also offloaded his inherited Magnum Ice Cream shares, fully severing ties with Unilever cityam.com.
