Unilever asset sale, profits lifts shares

SHARES in the Unilever consumer goods combine surged 78p to 1,471 after the new chairman, Mr Niall FitzGerald, delighted the market with plans to raise around £4 billion sterling through the sale of the group's worldwide speciality chemicals business.

The major fund-raising exercise was unwrapped alongside better-than-expected annual figures detailing a 16 per cent increase in 1996 pre-tax profits to £2.66 billion sterling on sales up 6 per cent to £33.5 billion sterling at current prices. Also delighting the share market was news an unexpected 9 per cent increase in total dividend to 32p per share.

Funds raised through the sale of the speciality chemical business will be used to support further investment in consumer products, possibly through entry into the acquisition market. Shares in Reckitt & Colman were marked higher on immediate speculation that it might feature on Unilever's takeover list. Other possible takeover targets include Heinz and Colgate in the United States.

Disposal of the speciality chemicals business will mark a major shift in emphasis for Unilever. Employing nearly 16,000 people in 35 countries and turning over £3 billion annually, the business accounts for around 10 per cent of Unilever's worldwide activities.

Mr FitzGerald, commenting the projected sell-off, expressed his belief that "active portfolio management" is the key to long-term value creation. "In this on-going process, we have reached the conclusion that we should concentrate on fast-moving consumer goods which represent over 90 per cent of Unilever's sales," he said.

Taking the decision to sell the speciality chemicals business "had not been easy"as the companies concerned were successful and profitable and had been part of the "Unilever family" for many years. "But the world economy is changing and increasingly we have to compete on a global basis making cost-effective use of scale economies in capital and know-how," said Mr FitzGerald.

"We believe our decision will provide greater scope for the speciality chemicals companies to develop further their considerable potential."