ALEX BRUMMER: Unilever buyers are being bought brief in sell-off

The hurried effort by Unilever to become a pure-play health, well-being and beauty outfit by offloading food operations to US ingredients group McCormick is not going well.

There is a big £7billion hit to the share price. A chunk of the empire – Hindustan Unilever along with Nepal and Portugal – is excluded from the transaction, adding complexity.

Investors in Unilever will end up owning 55 per cent of the offloaded food company to be run by McCormick. But they are not getting any say on a deal which values key brands Hellmann’s, Knorr and Marmite at a chunky $45billion (£33.5billion).

Moreover, there is no obligation on Unilever to produce a circular outlining the exact details of the transaction, such as advisers’ fees, directors’ dealings and banking arrangements to shareholders.

Contrast this with the junior partner to the deal, McCormick, which operates under Securities & Exchange Commission rules in the US. It is required to conduct a shareholder vote and produce a large quantum of documentation.

The technical reason for this imbalance of disclosure and shareholder democracy is that the trade is being constructed as a Reverse Morris Trust.

Under such arrangements, the company doing the spin-off avoids big tax liabilities if it retains a 50.1 per cent stake in the divested enterprise. Financial consultants often argue that it is a mistake to let tax considerations alone drive transactions.

Advisers to the deal are seeking to convince shareholders that in combining McCormick’s ingredients with Unilever’s condiments they are creating something unique among food enterprises. It is hard to square the enthusiasm for the combined entity, with Unilever’s decision to ditch food on the grounds that it grows more slowly than health and well-being brands.

One understands why Unilever chief executive Fernando Fernandez is in a hurry. Under the watchful eye of Nelson Peltz, who we are assured is not a major factor in the deal, Britain’s premier fast-moving consumer goods company jettisoned two chief executives, Alan Jope and Hein Schumacher, in less than a two-year period.

Fernandez is still flexing his muscles. Speaking at a Barclays fireside chat, he reportedly told Hindustan Unilever chief Priya Nair that he needs to make the Indian offshoot, which is responsible for 16-17 per cent of group income, ‘portfolio fit’ after losing ground to competitors. Fernandez continues to buy bolt-on enterprises adding US vitamins brand Gruns, which makes gummies using green supplements. With all this happening, one might have expected some of the big beasts on the Unilever share register to want a say.

Blackrock owns 8.5 per cent, and one would think Terry Smith’s Fundsmith, critical of Unilever in the past, would want more information about the underpinnings of the McCormick transaction. They might also want to know about plans for running down the food stake, which is unlikely to happen until 2028. The Leverhulme Trust, keepers of the founding Lever estate with 2 per cent of the equity, and private investors, including this writer, deserve a say.

Blame for the absence of shareholder democracy is attributed to the Financial Conduct Authority in its rush to make British equity markets more competitive.

It is extraordinary that the biggest British corporate transaction of this year can be bulldozed through behind closed doors, with minimal disclosure to investors in Britain and across the globe.

Selling off food could well be the right decision. Depriving Unilever shareholders of the final word is a betrayal.