Star stockpicker Terry Smith dumps entire Unilever holding after McCormick mega-merger

Terry Smith, the founder and chief investment officer of the £12.5bn Fundsmith Equity Fund, has fully divested his holding in Unilever. The sale, which occurred in April 2026, represents the exit of one of the fund’s longest-held investments, having first invested in the consumer goods giant in 2010.

The decision to sell a stake worth hundreds of millions of pounds follows Unilever’s March 2026 agreement to merge its food business with the U.S. Company McCormick in a deal valued at $45bn (£33bn). The move is part of a broader effort by Unilever to offload under-performing assets.

Criticism of Activist-Driven Strategy

Smith accused Unilever of shifting its strategy away from operational stability toward break-ups driven by activist investors. He specifically cited the McCormick deal as a primary reason for the divestment.

“We have sold out of Unilever because the company appears to have abandoned its promised operational focus in favour of activist-driven break-ups,” Smith told City AM. Those included its decision to transfer “its food business to McCormick, whose management and returns we do not rate highly”

Terry Smith

The McCormick deal involves the transfer of food brands such as Knorr and Hellmann’s, both of which Unilever had previously identified as “power brands” that would receive additional resources as part of earlier strategic overhauls. Under the terms of the agreement, Unilever investors will own 65 per cent of the resulting merged company.

Market Reaction and Governance Concerns

The announcement of the tie-up in March 2026, which was reportedly spearheaded by activist investor Nelson Peltz, led to an immediate seven per cent decline in Unilever’s share price.

Market participants have expressed concerns regarding the level of debt being placed on the merged entity. Smith and other investors criticized Unilever for utilizing new London listing rules to finalize the deal, a move that allowed the company to bypass a shareholder vote.

Further concerns have been raised regarding the potential for a sell-off if the new entity decides against listing in London, as some FTSE 100 shareholders are mandated to invest only in UK-listed companies.

Leadership Transitions and Performance

The divestment ends a 15-year period during which Fundsmith was one of Unilever’s top 10 largest shareholders. While the value of the investment more than doubled since 2010, the company had consistently hampered Fundsmith’s performance since the pandemic, appearing frequently as a top detractor in monthly investor bulletins.

Smith had previously been a vocal critic of former chief executive Alan Jope. In a 2022 annual letter to shareholders, Smith claimed Unilever leadership had “lost the plot” after the company announced plans to assign social or environmental purposes to flagship brands like Hellmann’s mayonnaise.

While Smith initially expressed optimism following the 2023 appointment of Hein Schumacher—describing the management team as “actually pretty decent” and viewing Unilever as an undervalued stock—Schumacher was removed from his role after two years. This removal followed pressure from Nelson Peltz over the speed of the company’s turnaround.

Schumacher was replaced by chief financial officer Fernando Fernandez. Upon taking the role, Fernandez initiated a plan to spin off the company’s ice cream division before selling the remaining food brands to McCormick.

Unilever Response

A spokesperson for Unilever defended the transaction, stating that it allows for a growth-led separation of the food business at an attractive valuation, creating two stronger companies positioned to win in their respective categories.

“The transaction was a unanimous decision by the board, which firmly believes it is in the best interests of Unilever’s shareholders. We value open dialogue with our shareholders and will continue our engagement to explain the benefits of the transaction. Under the UK rules, it was the board’s responsibility to approve the transaction and conclude that it is in the best interests of the company and its shareholders.”

Unilever Spokesperson