Unilever Plc, the owner of Lipton and PG Tips, agreed to sell some tea assets to buyout firm CVC Capital Partners in one of the year’s biggest carveouts by a European company.
The transaction values the business at €4.5 billion on a cash-free, debt-free basis, Unilever said in a statement Thursday, confirming an earlier report by Bloomberg News. CVC has reached an agreement with Unilever after beating out rival private equity bidders including Advent International.
A sale of the tea business, called ekaterra, marks a much-needed win for Unilever Chief Executive Officer Alan Jope, who’s been seeking to rejig the company’s portfolio to keep up with changing consumer tastes. The firm abandoned a planned $1 billion sale of a beauty product portfolio earlier this year after failing to attract sufficient demand from potential buyers, people familiar with the matter said.
“The evolution of our portfolio into higher growth spaces is an important part of our growth strategy,” Jope said. “Our decision to sell ekaterra demonstrates further progress in delivering against our plans.”
Shares of Unilever, which sells Dove soap and Ben and Jerry’s ice cream, have fallen 13 per cent in London this year. Rivals including L’Oreal SA and Nestle SA have gained as consumer spending came back in the wake of the pandemic. Unilever’s stock performance and pace of change have led to speculation the company would attract activist investors’ attention, especially after Elliott Investment Management’s campaign at GlaxoSmithKline Plc this year.
Demand for tea has suffered in recent years amid a shift to flavorful herbal alternatives and artisan coffee. The company said in January 2020 that it was starting a strategic review of its tea business that could result in a partial or full sale.
It later moved to scale back the scope of the tea sale and retain operations in emerging markets. The sale excludes Unilever’s tea units in India and Indonesia and its partnerships 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 about €2 billion 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 spreads business to KKR and Co. for about $8 billion. The company tried to profit from growth in herbal tea by acquiring the Pukka brand in 2017. That label will also be included in the sale.
European buyout giant CVC oversees about $165 billion of committed capital, according to its website, after raising a record buyout fund last year. The company has invested in both high-profile brands as well as food and beverage producers before. Its holdings have included the Formula One auto racing series, Swiss watchmaker Breitling AG, Indonesian snack maker GarudaFood and Czech brewer StarBev, according to its website.– Bloomberg