Unilever Plc, the parent company of Lipton and PG Tips, has agreed to sell some of its tea operations to buyout firm CVC Capital Partners in one of the year’s largest carveouts by a European company.
Unilever said in a statement Thursday that the acquisition values the company at 4.5 billion euros ($5.1 billion) on a cash-free, debt-free basis, confirming an earlier story by Bloomberg News. After beating out rival private equity bidders such as Advent International, CVC has achieved a deal with Unilever.
Unilever Chief Executive Officer Alan Jope has been trying to rejig the company’s portfolio to meet up with changing customer tastes, and a sale of the tea business, known as ekaterra, is a much-needed win. According to people familiar with the situation, the company abandoned a proposed $1 billion sale of a cosmetic product portfolio early this year after failing to draw enough interest from possible bidders.
“An essential aspect of our growth plan is the evolution of our portfolio into higher-growth spaces,” says the company, “Jope remarked. “Our choice to sell ekaterra proves that we are making progress toward our goals.”
Unilever, the maker of Dove soap and Ben & Jerry’s ice cream, has seen its stock decline 13% in London this year. Rivals such as L’Oreal SA and Nestle SA have benefited as consumer spending has recovered during the pandemic. The stock performance and rate of change at Unilever have sparked concern that the business will be targeted by activist investors, particularly after Elliott Investment Management’s campaign at GlaxoSmithKline Plc earlier this year.
Changes in the Market
Tea’s popularity has dwindled in recent years as consumers prefer tasty herbal alternatives and gourmet coffee. In January 2020, the firm announced that it would begin a strategic evaluation of its tea business, which could result in a partial or complete sale.
Later, it decided to reduce the scope of the tea sale while keeping its activities in growing areas. Unilever’s tea units in India and Indonesia, as well as its partnerships in the ready-to-drink tea industry, such as its interest in a joint venture with PepsiCo Inc., are not included in the transaction.
