Unilever could have given their legacy brands some more time to make a comeback in the US market
Laundry, for once, finds itself in frontline news, coming directly
from one of the world’s most glorified, albeit slowing consumer markets, the US. This came right after FMCG major Unilever agreed to sell its US laundry business to PE firm Vestar Capital Partners. Unilever’s laundry operations include some high value fabric cleaning and conditioning brands such as All, Surf, Snuggle, Wisk and Sunlight, among others. The buyer is expected to amalgamate the acquired business with Huish Detergent Inc., a group company. The new combined entity will be known as Sun Products. According to Patrick Cescau, CEO, Unilever, “It puts our North American laundry brands into a company that’s focused on the laundry category & is well-positioned to become a strong player.”
Along with preferred shares worth $375 million (in the new company), Vestar paid Unilever, $1.07 billion in cash for the business. To make the deal more tempting, Vestar has further allowed Unilever to buy up to a 2.5% stake in Sun Products at current prices, whenever it so desires. Apparently, as per analysts, for Unilever, it was a good time to sell the American laundry operations as there was very little left for Unilever to hang on. As per the year’s second quarter results, the turnover from the American operations stood at $5.1 billion, a full 6% decline over same time last year. Operating margins were also down by about 1% (13.4%). After this sell-off, which is expected to complete by the end of 2008, Unilever will be able to concentrate on other high potential markets like Latin America, Asia and Africa. The laundry business in markets like India, where the company holds a market share of more than 45%, will be further expanded for future eventualities. “Our (future) strategy leverages on our strong brands, broad geographical footprint and products that meet everyday demand,” adds Cescau. The stock market acted positively, with Unilever shares rising by 44 p, stabilising at about $29 as on 28 July 2008.
Unilever is basking in the glory of this tactical decision but one may well question the logic of selling the business, which consists of some of Unilever’s most established legacy brands in the US; and took humongous time, effort and investment to build. Additionally, a PE firm’s ownership may create insecurities for these brands, which may not be nurtured and lose their much sought after sheen over time. Was it really time to pull the ‘Lever’? We wonder...
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
Laundry, for once, finds itself in frontline news, coming directly
from one of the world’s most glorified, albeit slowing consumer markets, the US. This came right after FMCG major Unilever agreed to sell its US laundry business to PE firm Vestar Capital Partners. Unilever’s laundry operations include some high value fabric cleaning and conditioning brands such as All, Surf, Snuggle, Wisk and Sunlight, among others. The buyer is expected to amalgamate the acquired business with Huish Detergent Inc., a group company. The new combined entity will be known as Sun Products. According to Patrick Cescau, CEO, Unilever, “It puts our North American laundry brands into a company that’s focused on the laundry category & is well-positioned to become a strong player.”Along with preferred shares worth $375 million (in the new company), Vestar paid Unilever, $1.07 billion in cash for the business. To make the deal more tempting, Vestar has further allowed Unilever to buy up to a 2.5% stake in Sun Products at current prices, whenever it so desires. Apparently, as per analysts, for Unilever, it was a good time to sell the American laundry operations as there was very little left for Unilever to hang on. As per the year’s second quarter results, the turnover from the American operations stood at $5.1 billion, a full 6% decline over same time last year. Operating margins were also down by about 1% (13.4%). After this sell-off, which is expected to complete by the end of 2008, Unilever will be able to concentrate on other high potential markets like Latin America, Asia and Africa. The laundry business in markets like India, where the company holds a market share of more than 45%, will be further expanded for future eventualities. “Our (future) strategy leverages on our strong brands, broad geographical footprint and products that meet everyday demand,” adds Cescau. The stock market acted positively, with Unilever shares rising by 44 p, stabilising at about $29 as on 28 July 2008.
Unilever is basking in the glory of this tactical decision but one may well question the logic of selling the business, which consists of some of Unilever’s most established legacy brands in the US; and took humongous time, effort and investment to build. Additionally, a PE firm’s ownership may create insecurities for these brands, which may not be nurtured and lose their much sought after sheen over time. Was it really time to pull the ‘Lever’? We wonder...
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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