Unilever PLC has agreed to sell its margarine and spreads business to KKR & Co for 6.83 billion euros (US$8.025 billion), ridding the Anglo-Dutch consumer goods giant of one of its worst-performing units as it focuses on faster-growing food and personal care niches.
The private equity firm’s purchase of the division, which owns brands including Flora and “I Can’t Believe It’s Not Butter,” is the biggest leveraged buyout announced in Europe this year.
Completion is expected in the middle of next year, the companies said in a statement on Friday.
The sale advances Unilever chief executive Paul Polman’s effort to focus the company on faster-growing brands such as Pukka Herbs tea and Sir Kensington’s condiments. The company, like rivals such as Nestle SA, is grappling with changing tastes that mean some of its older products are out of favor as consumers seek fresher, healthier alternatives.
The London and Rotterdam-based company is under pressure to simultaneously cut costs and accelerate sales after fending off an unsolicited, US$143 billion takeover bid this year from Kraft Heinz Co.
Unilever said it would return the net cash realized from the transaction to shareholders, “unless more value-creating acquisition alternatives arise.”
KKR beat out competition from Apollo Global Management and CVC Capital Partners, people familiar with the situation said.
CVC and Apollo declined to comment.
In selling the spreads unit, Unilever is parting with one of its most historic businesses. The world’s first margarine factory was founded in the Netherlands in 1872 and it merged with a rival business in 1927 to form Margarine Unie. Two years later, the combined company joined UK soapmaker Lever Brothers to form Unilever.
The sale “marks a further step in reshaping and sharpening our portfolio for long-term growth,” Polman said.
Unilever spreads business CEO Nicolas Liabeuf will remain in that position, Unilever said.
The unit’s sales shrank by 2 percent in the third quarter of the year, Unilever said in October, as declining bread consumption and an increasing appetite for butter over margarine cause a structural downturn in the category.
Unilever secured a good price, with the division selling at about 10 times its earnings last year, Societe Generale analyst Warren Ackerman said.
Despite slow or no growth, the spreads business was appealing for private equity bidders because of its strong operating profit margin of about 20 percent, compared with the company’s overall 16 percent, Ackerman said.
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