By Peter Evans
LONDON-- Unilever PLC said it would separate its struggling
spreads division into a stand-alone company, potentially the first
step toward the sale of a legacy business founded in 1872.
Unilever said Thursday the separation would help it stabilize
sales in a business that has become a drag on overall growth as
margarine has fallen out of favor with shoppers.
Consumers in the developed world are eating less bread than ever
before and, when they do, are increasingly choosing to use butter
instead of margarine. Americans in 2013 for the third straight year
bought more butter than margarine, according to IRI, a
market-research firm.
Unilever's spreads division, which includes brands such as Flora
and Bertolli margarine, will have a separate management team, be
able to set its own strategy and will report its own earnings,
Unilever Chief Financial Officer Jean-Marc Huët said at an investor
conference Thursday. The new business doesn't include Hellmann's
mayonnaise or Marmite sandwich spread.
The company will operate in developed markets only and will be
called Baking, Cooking & Spreading Co. It will be 100% owned by
Unilever and "continue to benefit from Unilever's scale," Mr. Huët
said. Unilever expects the new business to be operating by the
middle of 2015.
Spreads currently account for around 7% of Unilever's EUR49.8
billion ($61.37 billion) in revenue and about a quarter of its
foods division.
The spreads division has looked increasingly incongruous in
recent years as Unilever has shifted its focus toward high-margin
personal-care brands such as TRESemmé shampoo and Axe deodorant. In
the nine months ended Sept. 30, underlying sales (excluding
currency effects, acquisitions and disposals) in the spreads
business declined 3.2%, compared with an increase of 3.2% on that
basis across the whole company.
The decision to separate spreads is another step away from
Unilever's once-core food business. In the last two years, the
company has sold many of its big-name food brands, such as Skippy
peanut butter and Ragú pasta sauce. Food, which in 2008 accounted
for 35% of Unilever's business, now makes up 25%.
News of the separation caused Unilever's shares to rise strongly
in early trading and revived long-standing rumors that the business
eventually would be sold.
A Unilever spokeswoman said there were "no plans" to sell the
new company. "It remains a core part of our business and the cash
delivery is important to us," she said.
Still, many analysts said an eventual sale was inevitable, with
the business valued between EUR5.5 billion and EUR8 billion.
"This is definitely the start of a sales process," said Fintan
Ryan, an analyst at Berenberg Bank, who added that private-equity
investors were the most likely buyers.
If Unilever were to sell, the company would have more firepower
to pursue acquisitions in personal care. It sees that category as
the fastest way to growth, especially in emerging markets.
One possible target suggested by analysts is the personal-care
unit of Energizer Holdings Inc., for around $10 billion. That would
give Unilever the Schick brand of razors and the opportunity to
develop a category only just taking hold in the developing world.
Another potential deal is a $75 billion merger with
Colgate-Palmolive Co.
Unilever was created in 1929 through the merger of British soap
maker Lever Brothers and Dutch firm Margarine Unie. The Dutch side
of the business started producing margarine in 1872.
The spreads business "is an important part of our heritage, but
this will never be a barrier to us taking decisive action," Mr.
Huët said.
Write to Peter Evans at peter.evans@wsj.com
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