All-cash deal marks biggest purchase since 2000.
Unilever, the global consumer goods conglomerate, agreed to buy Sara Lee Corp’s personal-care and European detergent unit for ¤1.28 billion ($1.88 billion), in its biggest purchase in nine years.
Unilever, based in London and Rotterdam, will pay cash for the business, which makes Dove soap and had sales of more than ¤750 million for the year ending June 2009, according to a statement today. Sara Lee, which has been shedding units to focus on coffee and food, said the proceeds would help it buy back up to $1 billion in stock.
The purchase is the largest by Chief Executive Officer Paul Polman since he took the reins at Unilever at the start of the year. He focused the company on winning back cash-strapped shoppers and boosting sales volumes by cutting prices, and was rewarded as the company unexpectedly posted volume growth in western Europe in the second quarter.
“We’re not convinced that this is the greatest collection of assets, but another acquisition shows Unilever is still moving from the back foot — cost cutting, disposals — to the front foot — volume growth, acquisitions,” Credit Suisse analysts said in an e-mailed note.
The deal is Unilever’s biggest acquisition since buying SlimFast Foods Co and Ben & Jerry’s Homemade Inc for a combined $2.6 billion in April 2000. Unilever’s brands besides food include Vaseline and Axe deodorants. “This transaction builds on our portfolio in Western Europe and also in Asia,” Polman said in the statement. “The Sara Lee brands enjoy strong consumer recognition, offer significant growth potential and are an excellent fit with Unilever’s existing business.”
Unilever’s offer price values Sara Lee’s body-care operations, which also include Zwitsal baby shampoo and Zendium toothpaste, at 1.7 times annual revenue. In 2006, L’Oreal SA bought Body Shop International Plc for 1.5 times its sales.
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The transaction needs regulatory approval and the companies will consult with European employee works councils, Unilever said today.
To entice cash-strapped European consumers, Polman has also increased ad spending, boosted promotions and accelerated new product introductions since he took over as CEO.