CVC Capital Partners is buying the bulk of Unilever’s tea division for €4.5bn after beating off competition from rival private equity groups in an auction that concluded this week.
The business being sold is called ekaterra, which controls a portfolio of 34 tea brands, including Lipton, PG Tips, Pukka Herbs, T2, and TAZO, that generated revenues of €2bn in 2020. It employs around 20,000 people worldwide with 11 production factories in four continents and tea estates in three countries.
Unilever began the process of reviewing and spinning off its primary tea division over two years ago. The decision followed sluggish sales growth in the traditional tea category globally in recent years as consumers switched to coffee, herbal tea, and alternatives such as kombucha. The group’s Chief Executive Alan Jope wants to focus its operations and financial muscle on acquiring brands in faster-growing consumer categories such as skincare and plant-based food.
However, Unilever will retain its better-performing India and Indonesia tea operations, and its Lipton ready-to-drink tea joint venture with PepsiCo. These parts are estimated to generate sales of around €1bn.
ekaterra will be sold to CVC’s Capital Fund VIII on a cash and debt-free basis in a process that is expected to conclude in the second half of next year.
Commenting on the deal, Jope said: “The evolution of our portfolio into higher-growth spaces is an important part of our growth strategy for Unilever. Our decision to sell ekaterra demonstrates further progress in delivering against our plans.
“We are proud of the place that our tea business has in our company’s history. We look forward to seeing ekaterra, with its strong brands and global footprint, prosper under CVC’s ownership.”
Pev Hooper, a Managing Partner at CVC Capital Partners, added: “ekaterra is a great business, built on strong foundations of leading brands and a purpose-driven approach to its products, people and communities.
“ekaterra is well-positioned in an attractive market to accelerate its future growth, and to lead the category’s sustainable development. We look forward to working with the team to realise ekaterra’s full potential.”
Unilever recently posted stronger-than-expected quarterly organic sales but warned that inflationary pressures would only worsen in 2022.
Earlier this month, it was reported that the company had shelved the planned sale of some of its non-core beauty and personal care brands after a lack of bidders.
NAM Implications:
- NamNews readers are familiar with the PE playbook…
- Rivals can anticipate a new kind of competition in the brands sold off.
