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Unilever will pay $1.87 billion (1.28 billion euros) in cash for the business, which includes brands likeand . The acquisition is expected to strengthen the company's position in skin care and deodorants in Western Europe, and build the brands in emerging markets.
"There is a big opportunity to roll out these brands across their entire emerging market business," Evolution Securities Ltd. analyst Warren Ackerman told the Financial Times.
Ackerman said the deal would boost Unilever's European skin care market share from 13% to 23%, increasing its lead over competitors such as Colgate-Palmolive Co. (NYSE: CL), Henkel AG & Co. (OTC ADR: HENOY) and Beiersdorf AG.
Unilever investors sold the deal, valued at 1.7 times the amount of the Sara Lee business. London-based Unilever PLC's stock fell in Friday trading, closing down 0.79% at $27.66 a share. Rotterdam-based Unilever NV's stock closed down 0.71% at $28.14.
For Sara Lee, the deal is the first step towards returning to a food-only business. The company said it received "significant interest" for the remainder of its household business – which includes air care, shoe care, insecticides and non-European cleaning brands – that it plans to divest.
Sara Lee says the deal is in the best interest of investors.
"The divestiture of body care and European detergents would advance our strategy to concentrate on our core food and beverage businesses where we enjoy a strong competitive position and where we can generate superior shareholder returns," said Brenda Barnes, chairwoman and chief executive officer at Sara Lee. "We intend to use proceeds from the divestiture to invest for growth in our core businesses and to repurchase stock."
Sara Lee wasted no time in buying back some of its shares from investors. The company authorized a $1 billion share repurchase program, about 89.2 million shares based on Friday's share price. The repurchase is in addition to the $150 million, or 13.5 million shares that were authorized in its last fiscal year.
"This is a pretty extraordinary statement," Sara Lee Chief Executive Officer Brenda Barnes told Bloomberg. "This is a one-time, big buyback." There is no deadline for the buyback, she added.
Shares of Sara Lee gained 6.36% this afternoon, trading at $11.21.
News and Related Story Links:
- Financial Times:
Unilever to Buy Sara Lee Personal Care Business
- Bloomberg News:
Unilever Plans to Buy Sara Lee Soaps for $1.9 Billion