Unilever sells tea business to private equity firm CVC Capital Partners in £3.8bn deal
Unilever’s tea business has been snapped up by private equity. CVC Capital Partners paid £3.8billion for the consumer group’s division, whose brands include Lipton and PG Tips.
The private equity firm fought off rivals Advent and Carlyle to secure the deal. The purchase brings to an end a two year process of reviewing and spinning off the division by Unilever.
But analysts questioned how much growth there is to be had as the business has been a drag on Unilever, with consumers in developed countries switching to drinking coffee and herbal tea.
Tea’s up: CVC Capital Partners paid £3.8bn for Unilever’s tea business, whose brands include Lipton and PG Tips
As a result the sale is being seen as a win for Unilever boss Alan Jope, who has been seeking to rejig the company’s portfolio to keep up with changing consumer tastes. Neil Wilson, analyst at Markets.com, said: ‘This is a legacy business, with little or no growth.’
But it is understood executives at CVC believe that improving the unit’s environmental, social and governance credentials will ultimately help them to sell it on at a profit.
It is not the first time Unilever has sold unwanted assets to private equity. Under former boss Paul Polman, it sold its margarine and spreads business to KKR for £6billion.
Private equity firms have embarked on a huge spending spree in the UK in the past 18 months, snapping up British companies across the board – and triggering fears for jobs.
High profile deals include the sale of Morrisons to Clayton Dubilier & Rice and Asda to the billionaire Issa brothers and TDR Capital.
CVC is well known for investing in recognisable brands. Its holdings include Formula One and Swiss watchmaker Breitling.
Jope, 58, warned last month that Unilever was struggling with rising prices, supply issues and ongoing coronavirus lockdowns.
Highlighting ‘unprecedented cost inflation’, the FTSE100 chief executive yesterday said ‘the operating environment across our markets worldwide remains volatile’.
Shares in Unilever, which sells Dove soap, Ben & Jerry’s ice cream and Hellmann’s mayonnaise, have shed more than 14 per cent this year and yesterday fell another 0.8 per cent, or 32.5p, to 3823p.
Fears are that the languishing share price could draw attention from activist investors like Elliott and Cevian.