Unilever agreed to sell its margarine and spreads business to KKR & Co. for 6.83 billion euros ($8.1 billion), ridding the Anglo-Dutch consumer-goods giant of one of its worst-performing units as it focuses on faster-growing food and personal-care niches.
The private equity firm’s purchase of the division, whose brands include Flora and I Can’t Believe It’s Not Butter!, is the biggest leveraged buyout announced in Europe this year. Completion is expected in the middle of 2018, the companies said in a statement Friday.
"Sprexit has finally happened," Warren Ackerman, an analyst at Societe Generale, said by phone.
The sale advances Chief Executive Officer Paul Polman’s effort to focus Unilever on faster-growing brands such as Pukka Herbs tea and Sir Kensington’s condiments. The company, like rivals such as Nestle SA, is grappling with changing tastes that mean some of its older products are out of favor as consumers seek fresher, healthier alternatives. The London- and Rotterdam-based company is under pressure to simultaneously cut costs and accelerate sales after fending off an unsolicited, $143 billion takeover bid this year from Kraft Heinz Co.
Unilever said it would return the net cash realized from the transaction to shareholders, “unless more value-creating acquisition alternatives arise.”
KKR beat out competition from Apollo Global Management and CVC Capital Partners, according to people familiar with the situation. CVC and Apollo declined to comment.
The deal overshadows other buyouts announced this year. After a long takeover quest, private equity firms Bain Capital and Cinven acquired German pharmaceutical maker Stada for 5.4 billion euros including debt in August. In September, Hellman & Friedman agreed to buy payment processor Nets for about 33 billion Danish kroner ($5.2 billion).
In selling the spreads unit, Unilever is parting with one of its most historic businesses. The world’s first margarine factory was founded in the Netherlands in 1872, and it merged with a rival business in 1927 to form Margarine Unie. Two years later, the combined company joined U.K. soapmaker Lever Brothers to form Unilever.
The sale “marks a further step in reshaping and sharpening our portfolio for long-term growth,” Polman said.
Nicolas Liabeuf, CEO of the spreads business, will remain in that position, Unilever said. The unit’s sales shrank by 2 percent in the third quarter, Unilever said in October, as declining bread consumption and an increasing appetite for butter over margarine cause a structural downturn in the category.
Ackerman said Unilever secured a good price, with the division selling at about 10 times its 2016 earnings. Despite slow or no growth, he said, the spreads business was appealing for private equity bidders because of its strong operating profit margin -- about 20 percent, compared with the company’s overall 16 percent.
— With assistance by Ruth David, Manuel Baigorri, and Sarah Syed