Unilever wants to focus on development of business for its fast growing products and therefore it has agreed to sell of its margarine and spreads business for 6.83 billion euros ($8.04 billion) to the U.S. private equity firm KKR.
There had been previous reports in the media about the exclusive talks between the two companies after KKR had outrun a number of other firms vying for the business by bidding higher.
Unilever, the manufacturers of brands like Knorr soup and Dove soap, made the surprise announcement very recently.
Becel, Flora, Country Crock and Blue are among the popular brands that Unilever would be selling out to KKR. In February, Kraft Heinz had made an unsolicited bid for the business for a reported offer of $143 billion. Following that incident, a review of the assets of the business unit was made by Unilever. In April this year, the company had finally announced that it was putting up the business up for sale.
“The announcement today marks a further step in reshaping and sharpening our portfolio for long-term growth,” said Chief Executive Paul Polman. “The consideration recognizes the market leading brands and the improved momentum we have achieved.”
There has been a rising trend among people over years now of eating less of bread and margarine and this had resulted in the business going into decline for years now. However, Unilever claimed that it had taken measures to prevent further decline and currently the business is giving good returns. The auction, which was run by Goldman Sachs and Morgan Stanley, had become attractive proposition due to the profitability of the business unit for private equity firms. These types of firms were the primary bidders in the auction process.
As of the end of September 2017, the New York KKR has assets that it manages totaling $153 billion. Chinese white goods maker Qingdao Haier and India’s Coffee Day Resorts are among the many investment that the firm has made in the consumer sector and the firm has a long history of such investments. Vitamin maker Nature’s Bounty was the latest investment by KKR earlier this year where it bought majority control stake.
After getting regulatory approvals and employee consultations, the buying of the Unilever business unit is anticipated to end by mid-2018.
While Unilever would look out for value-creating acquisition options that can be acquired by the cash that would be generated by the deal, the company said that it would return the money to the shareholders in case it fails to find an adequately lucrative project to invest the money in.
Small business of Unilever which include the likes of Tazo tea, Sundial Brands and Carver Korea have been snapped up by the company this year.
Last month, Unilever – an Anglo-Dutch company, announced that it had planned to put an end to its dual structure and transform itself into a single entity. However, the company is yet decide whether it would be based out of Britain or the Netherlands
(Adapted from Reuters)