Unilever to sell Spreads business to private equity KKR in near €7bn deal

18 Dec 2017 --- Unilever has received a binding offer from KKR to purchase its global Spreads business for €6.825 billion on a cash-free, debt-free basis. Unilever’s Spreads business includes brands such as Becel, Flora, Country Crock, Blue Band, I Can’t Believe It’s Not Butter, Rama and ProActiv. It operates across 66 countries around the world. In 2016 the business had a turnover of €3,032 million, EBITDA (before any carveout adjustments under new ownership) of €680 million, and assets of €1,108 million. This announcement, including the information contained in this release, excludes the South Africa Spreads business.

Paul Polman, CEO of Unilever said “In April of this year we set out our 2020 program to accelerate sustainable value creation. After a long history in Unilever, we decided that the future of the Spreads business would lie outside the Group. The announcement today marks a further step in reshaping and sharpening our portfolio for long-term growth. The consideration recognizes the market-leading brands and the improved momentum we have achieved. I am confident that under KKR’s ownership, the Spreads business with its iconic brands will be able to fulfill its full potential as well as societal responsibilities.”

Nicolas Liabeuf, CEO of Spreads, who will continue to lead the business, added “There is a positive momentum in the performance of the Spreads business and we are excited about continuing this journey with KKR. We are confident that our business and the entrepreneurial spirit of our people will thrive further under new ownership.”

Johannes Huth, Head of KKR EMEA said: “The strength of the portfolio of consumer brands in Spreads provides a firm foundation for future growth. We look forward to deploying our global network and operational expertise to support the business’s growth ambitions while continuing to follow Unilever’s responsible sourcing policies, including working towards the goal of sourcing 100 percent sustainable palm oil by 2019.”

The investment is being funded by both the European and N. American private equity funds of KKR.

The offer is subject to certain regulatory approvals and employee consultation in certain jurisdictions. Completion is expected mid-2018. Unilever intends to return the net cash realized to shareholders unless more value-creating acquisition alternatives arise. The transaction constitutes a class 2 transaction for the purposes of the UK Listing Rules. Further information about Unilever’s Spreads business is provided below.

As previously announced, Unilever will acquire Remgro’s 25.75 percent shareholding in Unilever South Africa Holdings (Pty) Ltd (Unilever SA) in exchange for the Unilever Spreads business in Southern Africa as well as a cash consideration.

WSJ notes how in September, Unilever, the world’s biggest tea maker, acquired Pukka Herbs Ltd., a UK based organic herbal tea maker for an undisclosed amount, and Korean skin-care company Carver Korea for about US$2.7 billion. This month, rival Nestlé SA, which is under pressure from US activist investor Third Point to boost shareholder value, struck a deal to acquire Canadian vitamin maker Atrium Innovations Inc. for US$2.3 billion, including debt.

Three years ago Unilever announced it was hiving off its US 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 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.

FoodIngredientsFirst has reached out to Unilever for comment.

Elsewhere in the business, Unilever announced an agreement to acquire Schmidt’s Naturals, a personal care company based in Portland, Oregon.

Founded in 2010 by Jaime Schmidt, Schmidt’s Naturals started as a deodorant brand and has extended its offering to bar soap and toothpaste. Schmidt’s natural deodorants include award-winning formulas derived from plants and minerals.

“Schmidt’s Naturals is a strong, innovative brand in the fast-growing natural category, and nicely complements our existing portfolio of US deodorants which includes leading brands Degree, Axe and Dove,” said Kees Kruythoff, President, Unilever North America. “The brand’s focus on transparency and mission to make natural products accessible to everyone aligns closely with Unilever values and represents an exciting category expansion for our family of brands.”

Alan Jope, President, Unilever Personal Care, added: “Schmidt’s Naturals is a great strategic fit for our Personal Care business, allowing us to reach new consumers who prefer natural options. We look forward to utilizing our Personal Care leadership to extend Schmidt’s Naturals into new sales channels and geographies.”

Co-founders Jaime Schmidt and Michael Cammarata will continue to be involved with the brand.

“Today is a momentous day in the history of Schmidt's Naturals as we announce our joining of the Unilever family of brands,” said Jaime Schmidt, Founder, Schmidt’s Naturals. “Thanks to our community, what started humbly in my kitchen and local farmers’ markets has grown into homes worldwide. I am proud to say that as a result of our partnership with Unilever, we are better positioned than ever in our mission to make natural products accessible to all. Moreover, Unilever’s substantive actions towards creating a more sustainable and equitable future for diverse peoples across the planet further fuels the enthusiasm behind our alliance.”

Michael Cammarata, Co-founder and CEO, Schmidt’s Naturals: “As long as I can remember, I’ve had one dream—to build and be part of a meaningful company that would help change the world and empower people everywhere to live their best lives. Today, Schmidt’s Naturals and Unilever are coming together to bring natural products to the world in new and innovative ways. Through our partnership, we look forward to Unilever taking Schmidt’s Naturals to new heights and cementing the brand’s mission.”

Terms of the transaction were not disclosed. Subject to any applicable governmental authorizations, the transaction is expected to close no later than the first quarter 2018.