KKR to Buy Unilever Unit for $8 Billion -- WSJ
16 December 2017 - 8:02AM
Dow Jones News
By Ben Dummett and Saabira Chaudhuri
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 16, 2017).
U.S. private equity giant KKR & Co. agreed Friday to acquire
Unilever PLC's margarine and spreads business in a deal that values
the unit at EUR6.83 billion ($8.03 billion), making it one of the
largest European acquisitions by a buyout firm this year.
The Anglo-Dutch conglomerate in April first announced plans to
sell the 145-year-old business as part of a broader effort to boost
shareholder returns after rebuffing a $143 billion takeover offer
from Kraft Heinz Co. in February. Unilever, which sells products
ranging from Dove Soap to Lipton tea, is acquiring faster growing
consumer brands, cutting costs, buying back shares and increasing
dividends to help appease investors.
The sale "marks a further step in reshaping...our portfolio for
long term growth," Unilever Chief Executive Paul Polman said in a
release.
KKR beat out rival private-equity firms Apollo Global Management
LLC and CVC Capital Partners for the margarine and spreads
business. The deal comes at a time when some PE firms, flush with
cash, are seeking bigger acquisitions to invest the funds
expeditiously to start generating returns. Apollo, in particular,
highlights that pressure after raising $23.5 billion this summer in
the biggest buyout fund ever.
At a valuation of more than $8 billion, the KKR-Unilever spreads
deal would rank as the second largest PE transaction in Europe so
far this year after China Investment Corp.'s $13.7 billion deal to
acquire warehousing operator Logicor Europe Ltd. in June, according
to Dealogic.
Unilever's spreads operation, which includes brands such as
Country Crock and I Can't Believe It's Not Butter, has suffered
from declining sales in Europe and the U.S. for years as consumers
switched to butter. The lack of revenue growth gave many of the
major consumer-goods companies reason not to bid, bankers have
said, as the sector increasingly invests in healthier food lines
and faster growing personal-care and home products.
In September, Unilever, the world's biggest tea maker, acquired
Pukka Herbs Ltd., a U.K. based organic herbal tea maker for an
undisclosed amount, and Korean skin-care company Carver Korea for
about $2.7 billion. This month, rival Nestlé SA, which is under
pressure from U.S. activist investor Third Point to boost
shareholder value, struck a deal to acquire Canadian vitamin maker
Atrium Innovations Inc. for $2.3 billion, including debt.
Private-equity firms often bet they can operate businesses that
are carved out from the parent companies more efficiently by
employing a dedicated management team and resources that the unit
might otherwise not get as part of the larger more diversified
entity.
The agreement caps years of speculation about whether Unilever
would sell the business, to which it owes its origins. Unilever was
founded in 1929 through the merger of British soap maker Lever
Brothers and the Netherlands' Margarine Unie, which began making
the plant-derived spread in 1872.
Three years ago Unilever announced it was hiving off its U.S.
and European margarine business into its own "baking, cooking and
spreads" unit that would allow it to manage its own costs and make
decisions independent of the rest of the company. Sales had flagged
for years but Unilever's Mr. Polman was reluctant to sell the
highly cash generative business. The baking, cooking and spreads
unit created new cooking products and poured money into marketing
efforts highlighting spreads' health benefits. But those efforts
failed and sales continued to stumble.
Corrections & Amplifications Unilever PLC said Friday that
it would sell its global spreads business to KKR & Co. L.P. for
$8.1 billion An earlier version of this article incorrectly stated
the deal was worth $7.4 billion. (12/15)
Write to Ben Dummett at ben.dummett@wsj.com and Saabira
Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
December 16, 2017 02:47 ET (07:47 GMT)
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