Unilever sells Lipton tea to CVC Capital for $5 billion
Unilever has agreed to sell some of the world's most famous tea brands, from Lipton to PG Tips, to acquisition firm CVC Capital Partners in one of the largest European company acquisitions of the year.
Unilever said in a statement on Thursday that the deal values the business at 4.5 billion euros ($5.1 billion) on an illiquid and debt-free basis, confirming an earlier report by Bloomberg News.
CVC reached an agreement with Unilever after outsmarting rival private equity bidders including Advent International.
The sale of the tea company, called ekaterra, represented a much-needed win for CEO Alan Job, who has been seeking to reorganize the company's portfolio to keep pace with changing consumer tastes.
People familiar with the matter said the company abandoned a planned $1 billion sale of its beauty portfolio earlier this year after it failed to attract enough demand from potential buyers.
“Evolving our portfolio into higher growth spaces is an important part of our growth strategy,” Job said.
He continued, "Our decision to sell Ikatera demonstrates further progress in achieving our plans."
Shares of Unilever, which sells Dove soap and Ben & Jerry's ice cream, are down 13% in London this year.
Competitors, including L'Oreal and Nestle, have made gains as consumer spending returns in the wake of the pandemic.
Unilever's stock performance and pace of change have led to speculation that the company will attract the attention of active investors, especially after Elliott Investment Management's campaign at GlaxoSmithKline Plc this year.
The demand for tea has suffered in recent years amid a shift to delicious herbal alternatives and handcrafted coffee.
The company said in (January 2020) that it had begun a strategic review of its tea business that could lead to a partial or full sale.
He later moved to scale back the sale of tea and maintain 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.
The company said Ekatera has a portfolio of 34 brands including Lipton, BJ Tips, Boca, T2 and Tazo, and generated revenue of nearly 2 billion euros last year.
Unilever said it expects to complete the sale in the second half of 2022.
Under former CEO Paul Pullman, Unilever sold margarine and distributed its business to KKR & Co. for about $8 billion.
The company tried to capitalize on the growth in herbal teas by acquiring the Pukka brand in 2017. This label will also be included in the sale.
The European acquisition giant CVC is overseeing about $165 billion in committed capital, according to its website, after raising a record buyout fund last year.
The company has invested in both prominent brands as well as food and beverage producers before.
Its holdings included the Formula 1 motor racing chain, Swiss watchmaker Breitling AG, Indonesian snack maker Garuda Foods and Czech brewery Star Beef, according to its website.