Unilever sells Birds Eye, Iglo Brands to Permira
Monday, August 28, 2006, 12:25
Unilever, the world's second-biggest food and detergent company, agreed to sell most of its European frozen-foods unit to Permira Funds for € 1.73 billion ($2.21 billion) to focus on more profitable brands. The sale includes the total frozen food portfolio under the Iglo and Bird's Eye brands in the following countries: Austria, Belgium, France, Germany Greece, Ireland, Netherlands, Portugal and United Kingdom. Unilever expects an after-tax profit of more than € 1 billion on the sale, according to a statement released by the Rotterdam- and London-based company today. The deal, which is subject to regulatory approval and a consultative process with the relevant employee works councils, is expected to be completed before the end of the year. The brands had revenue of € 1.24 billion last year. They include Iglo and Birds Eye, the maker of Captain Birds Eye Fish Fingers. Earnings growth at Unilever, the maker of Dove Lipton tea and Dove soap, is trailing that at Procter & Gamble Co. and Kraft Foods Inc., the world's No. 2 food company. Unilever CEO Patrick Cescau has sold underperforming divisions, cut jobs and introduced products such as Flora proactive spreads to catch up with its rivals. „The price is good and is ahead of my forecast of € 1.4 billion, Paul Linssen, an analyst at Petercam in Amsterdam, said in a telephone interview. „It is disappointing that they don't say anything about what they will do with the proceeds.” Unilever's Dutch shares rose 1 cent, or 0.1%, to € 18.38 at 10:44 a.m. in Amsterdam. The stock has declined 4.7% this year, while Cincinnati-based P&G has gained 5.2% and Kraft has climbed 17%.
Unilever, the maker of Hellmann's mayonnaise and Knorr soups, is selling its frozen-food operations in Austria, Belgium, France, Germany, Ireland, Netherlands, Portugal and the UK. The transaction will be completed by the end of this year. The company is keeping its ice-cream business and the Italian frozen-foods division. Permira, which bought Royal Ahold NV's Spanish retail division last year, is paying 1.4 times annual revenue and 9.9 times earnings before interest, taxes, depreciation and amortization, according to the statement. Buyout firms use a combination of their own funds and debt to pay for takeovers. They then typically seek to expand the companies or improve their performance before selling them within five years to other funds or to investors through stock offerings. London-based Permira beat out CapVest Ltd., owner of Findus frozen foods in Norway, Sweden and France as well as the UK's Young's Bluecrest Seafood, the Financial Times reported today. Other possible bidders included Blackstone Capital Partners LP, Kerry Group Plc and JPMorgan Partners LLC, the Sunday Times said on Aug. 27. CapVest may now look to sell its frozen-foods holding company, the FT said today. A logical next step for Permira may be to buy the CapVest division and combine it with the Unilever brands to create a company with sales of close to € 3 billion, the newspaper said, citing industry analysts.
Unilever said in February that it would sell the Birds Eye and Iglo brands in Europe. Sales at Unilever's western European frozen-foods unit fell last year, and sales growth would have been 0.20 percentage point higher without the business, Cescau said. Unilever's profit rose 35% to € 986 million in the Q2, less than analysts estimated. Sales advanced 3.3%, trailing the 25% increase reported by Procter & Gamble, the largest food and consumer-products company, and the 3.4% gain Northfield, Illinois-based Kraft. Cescau said earlier this month that Unilever will „actively” seek opportunities to buy companies that make healthy products and personal-care goods, as well companies in developing markets such as China, India and Vietnam. Unilever, the maker of Ben & Jerry's ice cream, has been reviewing the levels of trans-fats, saturated-fats, sodium and sugar in its foods. Vevey-Switzerland-based Nestle has cut the amount of salt and sugar in its products and acquired makers of healthy snacks and nutrient-enriched foods including Uncle Tobys. The company has also developed a Maggi bouillon cube with added olive oil and less monosodium glutamate. „They might use the money to strengthen their business in foods, perhaps healthy foods, similar to Nestle's current strategy,” said Paul Hofman, an analyst at Van Lanschot NV in Den Bosch, Netherlands, who has an „buy” rating on Unilever stock. He said the company may spend „up to a billion euros” for purchases outside Europe as well as continuing to buy back stock. Birds Eye of the US is a closely held company, not owned by Unilever. (Bloomberg, unilever.com)