Unilever Plc, owner of Lipton and PG Tips, agreed to sell some tea assets to buy out CVC Capital Partners in one of the biggest carvings of the year by a European company.
Unilever confirmed an earlier Bloomberg News report in a statement on Thursday, saying the transaction is valued at 4.5 billion euros ($5.1 billion) on a cash-free, debt-free basis. CVC has entered into an agreement with Unilever, outpacing rival private equity bidders including Advent International.
The sale of the tea business, called Ekaterra, marks a much-needed victory for Alan Jopp, chief executive officer of Unilever, which has been trying to adapt the company’s portfolio to keep up with the changing tastes of consumers. The firm planned to sell a beauty product portfolio for $1 billion earlier this year after failing to attract sufficient demand from potential buyers, people familiar with the matter said.
“Developing our portfolio in high-growth locations is an important part of our growth strategy,” Jopp said. “Our decision to sell Ekatera reflects further progress in distribution against our plans.”
Shares of Unilever, which sells Dove soaps and Ben & Jerry’s ice cream, are down 13% this year in London. Rivals including L’Oreal SA and Nestle SA have benefited as consumer spending kicks back in the wake of the pandemic. Unilever’s stock performance and pace of change have led to speculation that the company will attract the attention of active investors, especially after Elliott Investment Management’s campaign in GlaxoSmithKline plc this year.
market shift
The demand for tea has decreased in recent years amid changes in flavoring herbal alternatives and artisan coffees. The company said in January 2020 that it was initiating a strategic review of its tea business that could result in partial or complete sales.
It later went on to reduce the scope of tea sales and maintain operations in emerging markets. The sale does not include Unilever’s tea units in India and Indonesia and its participation in the ready-to-drink tea market, such as its stake in a joint venture with PepsiCo Inc.
Ekaterra has a portfolio of 34 brands, including Lipton, PG Tips, Pukka, T2 and TAZO, and generated nearly 2 billion euros in revenue last year, the company said. Unilever said it expects to complete the sale in the second half of 2022.
Under former CEO Paul Polman, Unilever sold its margarine and spread the business to KKR & Co for approximately $8 billion. The company tried to take advantage of the growth in herbal teas by acquiring the Pakka brand in 2017. That label will also be included in the sale.
European buyout giant CVC oversees about $165 billion in committed capital, according to its website, after raising record buyout funds last year. The company has previously invested in both high-profile brands as well as food and beverage producers. Its holdings include the Formula One auto racing series, Swiss watchmaker Breitling AG, Indonesian snack maker Garudafood and Czech brewer StarBev, according to its website.
(updated with additional information from the fourth paragraph)
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This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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