Unilever’s $45bn deal, Berkeley & tech: Companies and Markets Show
The Companies and Markets Show covers three major stories: Unilever's $45 billion spin-off of its food business to McCormick, UK housebuilder Barclay Group's downgraded medium-term forecasts amid economic uncertainty, and Raspberry Pi's 50% single-day share price surge following strong full-year results tied to AI enthusiasm.
Summary
The episode opens with Unilever's announcement of a $45 billion deal to spin off most of its food business — including brands like Marmite and Hellmann's Mayonnaise — to US spice maker McCormick. The deal is structured so Unilever shareholders will retain a 55% stake in the enlarged McCormick, with Unilever itself holding an additional 10% it plans to sell down. Unilever will receive approximately £12 billion upfront but faces $400-500 million in stranded costs and a two-year transitional services agreement with McCormick. Analysts are skeptical the deal won't distract from core operations. The remaining Unilever business will focus on beauty, personal care, and household products — reflecting CEO Fernando Fernandez's background — though it will retain food operations in India, Nepal, and Portugal. Asian exposure will rise from 44% to 48%. Investor sentiment has also been dampened by geopolitical conflict (described as the 'Iran war') raising input cost concerns and emerging market uncertainty. The deal's valuation is considered acceptable but the complex structure and McCormick share price exposure have led to a muted market reaction. Analysts rate it a hold with potential longer-term upside from higher-margin personal care products.
The second segment covers Barclay Group, a London-focused FTSE-listed housebuilder, which issued an unscheduled trading update just three weeks after its previous statement. While 2026 guidance was maintained, the company guided for only £1.4 billion in cumulative profit before tax between 2027 and 2030 — roughly what analysts had expected over just three years. The company plans to buy less land, build fewer homes, and operate leaner, citing higher-for-longer interest rates and deteriorating consumer sentiment tied to the ongoing geopolitical conflict. Despite this, the company maintained its £500 million capital return program through dividends and buybacks, with buybacks becoming preferred given shares trading at 0.7x tangible book value. Executive Chair Rob Perrins personally bought £200,000 of shares post-selloff. RBC upgraded the stock to outperform. The discussion also touched on broader implications for UK housing targets and London's stagnant construction pipeline, with analysts noting other housebuilders may follow suit in scaling back.
The final segment examines Raspberry Pi, whose shares jumped nearly 50% in a single day following full-year results that beat revenue expectations despite memory cost headwinds. Memory prices have risen sevenfold due to AI data center demand, representing 25% of Raspberry Pi's costs. The company is mitigating this through advance bulk purchasing, diversified supplier relationships, and passing costs on to customers. Raspberry Pi's business model has evolved from hobbyist computing toward industrial and OEM applications, with microcontroller unit sales now exceeding board sales for the first time. The company also generates royalty revenues similar to Arm's model. AI-related enthusiasm — particularly edge computing and the use of Raspberry Pi devices to run AI agents like OpenCore locally — has fueled retail investor interest, making the stock increasingly volatile with six 10%+ single-day moves already in the current year. While analysts acknowledge a solid underlying business with 25% revenue growth, the valuation post-rally is considered stretched, with a free cash yield of just 1%, and the stock is described as moving into 'meme-ish' territory.
Key Insights
- Unilever shareholders will retain a 55% stake in the enlarged McCormick post-deal, meaning they have involuntary exposure to McCormick's share price performance, which has already declined since the announcement.
- Unilever faces $400-500 million in stranded costs and a two-year transitional services agreement with McCormick, leading analysts to question whether the spin-off will distract from core business operations during the 12-15 month closing period.
- Barclay Group's medium-term profit guidance implies roughly 25-30% downgrades to analyst consensus estimates, with £1.4 billion in cumulative PBT now spread over four years rather than the previously expected three.
- Barclay Group's Executive Chair Rob Perrins cited 'higher for longer' interest rates and more cautious consumer sentiment — directly linked to the ongoing geopolitical conflict — as the primary reasons for revising long-term forecasts just three weeks after its previous trading statement.
- Raspberry Pi disclosed that memory costs have risen sevenfold due to AI data center demand, with memory representing 25% of product costs, yet the company managed to report revenue ahead of expectations by ordering inventory well in advance and passing price increases to customers.
- Raspberry Pi's microcontroller unit sales exceeded board unit sales for the first time, signaling a meaningful shift toward industrial and OEM customers, though microcontrollers currently generate negligible revenue due to extremely low unit prices requiring much higher volume to be material.
- The surge in interest in Raspberry Pi shares was partly sparked by hobbyists downloading AI agents like OpenCore onto the low-cost devices to avoid safety risks of running autonomous agents on their primary computers, which analysts argue signals future potential for edge AI computing in industrial settings.
- Unilever's Asian exposure will increase from 44% to 48% post-deal, largely driven by the retention of a lucrative Indian food business, at a time when geopolitical conflict is already creating uncertainty around emerging market consumer demand and oil-derivative input costs for personal care products.
Topics
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