Although Kraft Heinz swiftly announced that it was abandoning its attempt to buy Unilever (LSE: ULVR), a number of analysts expect Kraft Heinz would look to make a renewed bid for Unilever’s food and refreshments business. That’s because the US food group has big plans to shake up the low-growth foods industry and has the firepower to undertake such a deal, thanks to backing from Warren Buffett’s Berkshire Hathaway and Lemann’s 3G Capital.

But even if Kraft Heinz doesn’t return with another offer, I don’t expect things to return to normal for Unilever. I expect the failed bid to serve as a wake-up call for its management — and it seems that management acknowledges this too, as it released this statement on Wednesday: “Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. The events of the last week have highlighted the need to capture more quickly the value we see in Unilever.”

Accelerate cost cuts

First and foremost, management will face pressure to boost margins. That’s because its near 15% operating margins lag well behind the 25%-30% margins generated by peers such as Reckitt Benckiser, Colgate-Palmolive and Kraft Heinz. It could look to accelerate its cost savings programme in a bid to match its rival manufacturers’ profitability, but a more aggressive approach may be adopted.

Paul Polman, chief executive, is well known for his long-term value-creation model, following his decision to scrap quarterly reporting at the company. But he may decide this is the time to focus more on short-term value, by adopting a strategy called zero-based budgeting, which 3G Capital’s austere empire-building relies upon.

Dividends/buybacks

Had Kraft been successful in buying Unilever at around 4,000p a share, this would have raised the combined company’s net debt to around 5-6 times its EBITDA. As a standalone company, Unilever has net debt of only €12.6bn, which shows that it has the potential to leverage up to unlock value.

Analysts from Credit Suisse believe that should it increase its leverage to a still modest level of three times EBITDA, that it has the potential to buy back €20bn worth of its shares, or pay a special dividend of around €7 a share, which equates to a yield of around 17%. With interest rates still hovering near record lows, a buyback could be significantly accretive to earnings per share, while special dividends would likely only be slightly dilutive.

M&A

An alternative to returning cash to shareholders could be to bulk up Unilever’s personal care business. Sales of personal care products are growing much faster than they are for foods, while margins are holding up better.

It’s clear that management is already expanding into the market with recent acquisitions, such as the Dollar Shave Club and Dermalogica, albeit it is doing so at a much slower pace. Some have speculated that a tie-up with US consumer company Colgate-Palmolive could be much more transformative.

Bottom Line

Exactly what Polman and his team will do remains to be seen, but if there’s one thing I’m sure will happen, it’s that Unilever will announce big changes in the coming months.

The post What to expect from Unilever plc after Kraft Heinz Co’s abandoned bid appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Since the Brexit camp’s following has grown over the past few weeks, Lloyds shares have fallen by 12% to 64.8p,  taking them down 29% over the past year. And that’s a year in which the bank’s fundamentals have been improving with the shares now on a forward P/E as low as 8, and dividend yields of 6.5% and 7.6% forecast for this year and next.

The Bank of England has also weighed in, only this week saying that the EU referendum is the “largest immediate risk” faced by the world’s financial markets. The BoE has plans in place to support banks in the event of a leave vote, which highlights the reality of the risk.

On the other hand, should we get a remain vote, now could turn out to be the best time ever to buy Lloyds shares.

Single market

In another sector, consumer giant Unilever (LSE: ULVR) has warned that it would be harmed if Britain leaves the EU, saying that having access to “a single European market of 500 million consumers” has greatly helped its performance over the past 25 years.

In a letter to employees, Unilever’s chief executives and chairman wrote that “Unilever in the UK […] would be negatively impacted if the UK were to leave the European Union“.

And Unilever shares? After a strong start to the year, since 19 April we’ve seen a 7.4% price fall, to 3,084p. Unilever shares have traditionally commanded a relatively high P/E, but that’s largely dependent on its low risk and predictable markets. EU uncertainty is surely going to dent that confidence, and trusting the leave campaign’s claims that the UK’s European trade wouldn’t be affected if we quit the EU could be a very risky line to take for your investment security.

Aerospace troubles

Rolls-Royce (LSE: RR) is another great British company that’s said it expects to suffer if we leave. While the CBI was opining that Brexit would “put British businesses out in the cold“, Rolls-Royce bosses were writing to their employees to tell them it would “limit any company’s ability to plan and budget for the future”.

Chief executive Warren East told the Today programme that leaving the EU would provide a boost to US aerospace engine manufacturers at the expense of Rolls-Royce’s international competitiveness, adding that “uncertainty created by Brexit puts a lot of [the company’s investment decisions] on hold“.

After having been hit by a series of profit warnings, Rolls-Royce shares had been staging a bit of a recovery, but since early March we’ve seen a 15% drop to 617.5p, with a significant chunk of that coming on the back of the apparent rise in leave support.

Whatever other issues there are behind the EU referendum, looking at these three major companies in three vital sectors clearly suggests an exit won’t be good for your share portfolio.

The post Brexit could seriously harm Lloyds Banking Group plc, Unilever plc and Rolls-Royce Holding plc appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• 3,566 shares in this FTSE 100 stalwart earns a £1,443 second income
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.