Unilever Sells Sanex to Colgate to Shed Weight Post Sara Lee Deal

by Trefis Team
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On March 23, 2011, Colgate-Palmolive (NYSE:CL) agreed to buy Unilever’s (NYSE:UL) Sanex brand of personal care products for $954 million. The deal also includes Colgate selling its laundry detergent business in Colombia to Unilever for $215 million. As of now, both transactions are subject to regulatory approval. These two companies compete with consumer Proctor & Gamble (NYSE:PG), Avon (NYSE:AVP) and Kimberly-Clark (NYSE:KMB).

What Does it Mean for Colgate-Palmolive?

  1. Colgate strengthens its personal care business in Europe with shower gels and deodorants marketed under the Sanex brand amounting to sales of over $265 million in 2010.
  2. The deal helps Colgate focus on the higher-margin personal care business amidst rising commodity costs affecting household care product segments.
  3. Colgate believes the transaction would increase earnings by 4% and improve margins by 1% by 2012. Also, a deal was imminent given Colgate’s healthy cash position.

You can see a detailed analysis of our $88 Trefis price estimate of Colgate-Palmolive’s stock, which is inline with the current market price. We estimate that personal care products like shampoos, soaps, lotions and deodorants make up around 44% of Colgate’s stock value while oral care and pet nutrition make up the remainder accounting for 44% and 12% respectively.

What Does it Mean for Unilever?

  1. The sell-off of Unilever’s deodorants and bath-care business in Europe was required on antitrust grounds for European Union’s clearance of the $1.82 billion purchase of Sara Lee Corp’s personal care business in 2010.
  2. The deal brings in Colgate’s laundry brands such as Fab, Vel and Lavomatic improving Unilever’s position in a significant Latin American market, Colombia.
  3. In line with its goal to double revenues within this decade, Unilever has been on an acquisition spree, having acquired Alberto-Culver [1] and Sara Lee’s personal care and European laundry care businesses [2] in 2010.

Personal care items like shampoo, lotions, laundry detergents and deodorants make up just over 40% of Unilever’s value by our estimates which exclude various food items and home cleaning products that make up the rest. You can see a detailed analysis of our $35 Trefis price estimate of Unilever’s stock here, which is around 15% ahead of the current market price.

Notes:

  1. Unilever’s Alberto Culver Acquisition Adds Shine To Stock, Trefis, January 20′ 2011 []
  2. Unilever’s European Expansion Lifts Stock, Trefis, December 21′ 2010 []
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