Unilever-Sara Lee acquisition gets the nod from analysts

By Simon Pitman

- Last updated on GMT

Analysts and market experts have given the thumbs up to Unilever buying the Sara Lee personal care business.

Credit Suisse stated that although the brands were not the strongest, further acquisitions was a step in the right direction, while another analyst at Sanford C. Bernstein thought the deal offered good value.

Andrew Wood, a senior research analyst at Sanford C. Bernstein said that he thought the deal was positive for a number of reasons, namely that the business is already profitable and that it fits with Unilever’s aims to grow in personal care.

Unilever expands its presence in personal care

“Unilever is expanding its presence in personal care, one of the focus areas for the company and a higher-growth part of the HPC industry,”​ said Wood.

“The acquisition gives Unilever presence and scale in two of its ‘success-story’ categories within personal care, namely skin cleansers and deodorants."

Wood went on to comment about the profitability of the Sara Lee personal care division, pointing out the fact that that the business has been growing at 4 percent per year over the last few years.

Acquisition represents good value

Likewise, he also underlined his belief that the acquisition was a good deal for Unilever, pointing to the fact that, at ten times EBITDA, the €1.275bn acquisition price was ‘reasonable’.

Charlie Mills, analyst at Credit Suisse, was not so enthused by the brands that Unilever has acquired from Unilever, but nevertheless thought that it should prove to be a sound strategic move.

“We’re not convinced that this is the greatest collection of assets but another acquisition shows Unilever still moving from the back foot (cost cutting, disposals) to the front foot (volume growth, acquisitions),”​ said Mills.

Sara Lee big in body care

The Sara Lee personal care unit holds a number of leading body care brands, including Sanex, Radox and Duschadas, which are predicted to contribute to combined global sales of approximately €750m in 2009.

​Although the deal has been agreed by the two companies, it still has to undergo approval from various regulatory authorities worldwide, as well as European works councils.

Unilever said in a statement that it expects the deal to be closed during 2010, with the precise date likely to be determined by the regulatory approval.

Unilever has weathered the current economic downturn by concentrating on discounting its brands, particularly within its personal care division, where the business has remained strong.

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