The company said in today’s announcement: “We have had an extensive period of engagement with shareholders and have received widespread support for the principle behind simplification. However, we recognise that the proposal has not received support from a significant group of shareholders and therefore consider it appropriate to withdraw.”

Where to from here?

The proposal to simplify the group’s structure was one of a number of measures the board has pursued to “accelerate delivery of value for the benefit of our shareholders,” as a direct result of a 4,000p-a-share takeover bid by Warren Buffett-backed Kraft Heinz in February last year. Share buybacks, enhanced dividends and the disposal of the group’s spreads business have been welcomed, but many UK shareholders saw little value in ‘going Dutch’.

The shares are down 1% after today’s U-turn by the board and are trading at around the 4,000p level of the Kraft Heinz bid. I rate the shares as excellent value when the forward earnings multiple is below 20 and the prospective dividend yield is above 3%. At the current share price, the multiple is 19.9 and the yield is 3.3%. As such, I rate the stock a ‘buy’.

As an aside, I note the board said today that it “continues to believe” that simplifying the group’s dual-headed structure would be in the best long-term interests of Unilever. So I’m wondering if the somewhat embarrassing climbdown could be a catalyst for boardroom change and/or renewed interest from Kraft Heinz/Warren Buffett.

Hot property

In contrast to the muted movement of Unilever’s share price today, real estate firm Intu (LSE: INTU) has rocketed over 25%. This follows after-hours news late yesterday afternoon that a consortium is considering a possible offer for the FTSE 250 company, which owns some of the UK’s biggest shopping centres, including flagship assets the Trafford Centre in Manchester and Lakeside in Essex.

The consortium is led by Intu deputy chairman John Whittaker’s Peel Group, which already owns 26% of the company. Earlier this year, Hammerson pulled out of a 253.9p-a-share bid that valued Intu at £3.4bn. Even after soaring to 190p today, the value is only £2.6bn. Having said that, Intu’s half-year results in July saw a £0.65bn downward property revaluation, resulting in a fall in adjusted net asset value (NAV) per share to 362p from 411p at 31 December.

Nevertheless, we still have Intu trading at a substantial discount to NAV and with a running dividend yield of 7.4%. As veteran retail analyst Nick Bubb said this morning: “At this level, despite the near £5bn of debt and the pressure on rental values, you’d think that buying Intu was a pretty cheap way into its two flagship assets.” On balance, due to the sheer size of the discount to NAV and dividend yield, and the potential for a bid to realise value above the current share price, I rate the stock a ‘buy’

The post Why I’d buy FTSE 100 stock Unilever as it scraps plan to move HQ out of UK appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The right deal?

The merger of the two companies will take place via an all-share transaction. Shareholders in Intu will receive 0.475 New Hammerson shares for each share they currently own. This places a premium of 27.6% on the Intu share price as at close of business on 5 December 2017. This may appear to be a generous deal for the company’s investors – especially given the uncertainty in the UK retail sector at present.

However, it could also be argued that the deal undervalues the company. In fact, the £3.4bn purchase price for Intu is just 67% of its net asset value of £5.05bn. This suggests that there may be significant upside potential ahead for investors in the merged entity if the new strategy is able to gain traction and is welcomed by the stock market.

Clearly, a merger of this scale is set to have significant synergies. Already £2bn of asset disposals are being highlighted by the companies. In addition, cost savings seem likely, while a focus on higher-growth regions such as Ireland and Spain could bring increasing earnings and dividend growth in future. It may also bring additional sources of capital which allow the combined entity to expand its Premium Outlets Platform.

Therefore, the merger seems to be a logical step for the two companies to take, with it having the potential to drive improved operational, financial and share price performance in the long run.

More consolidation?

The REIT sector seems to be somewhat undervalued at the present time. When combined with an uncertain outlook driven by Brexit, this could lead to further consolidation across the sector. Two companies which appear to offer good value for money at present are Big Yellow (LSE: BYG) and Londonmetric (LSE: LMP).

Big Yellow has a price-to-book (P/B) ratio of just 1.5, which appears to be relatively low given its profit growth potential. The company has a dominant position in the UK storage sector and this could help to protect it to some degree from the potential headwinds within the economy.

The company is forecast to grow its bottom line by 8% next year, which suggests that it offers a degree of defensive characteristics. As well as this, a dividend yield of 3.6% which is due to rise to 3.9% next year, indicates that it offers strong income potential. With a sound strategy that has delivered earnings which have risen 3.3 times over the last four years, Big Yellow could be a potential bid target in future.

Low valuation

Similarly, Londonmetric appears to be cheap at the present time. It trades on a P/B ratio of 1.2, which is relatively low given its forecast growth rate of 5% per annum during the next two financial years. The company also has a strong income outlook. It has a dividend yield of 4.5% forecast for the next financial year, which could help its investors to overcome the threat of inflation. And with a strategy that has delivered four years of consecutive earnings growth, it appears to offer stability at a time when the outlook for the wider economy is uncertain.

Clearly, it’s difficult to select which companies could become bid targets. However, Big Yellow Group and Londonmetric both offer impressive investment outlooks and, with such low valuations, they could be attractive to a number of sector peers.

The post Intu Properties plc & Hammerson plc agree £21bn merger: are these 2 investment trusts next? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Big Yellow. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.