- Unilever has puts its margarine and spreads business up for sale, according to FoodBev Media. The unit includes Bertolli, Flora, Stork and I Can’t Believe it’s So Good.
- FoodBev speculates Dairy Crest, Kraft Heinz and Arla Foods could all be potential acquirers of the business valued at up to $8.5 billion.
- Paul Polman, Unilever’s CEO, said the margarine segment was in decline, so it may not attract some of the big players who normally are interested in deals like this.
A recent FMI research report found margarine consumption in developed countries is decreasing as more people become obese and health awareness programs becomes more fruitful. Margarine and spreads used to be viewed as healthier substitutes to butter, but their sales have been slipping for years.
Unilever’s own CEO called the spreads business “a declining segment” so buyers may not be lining up to acquire the brands too swiftly. It also explains why Unilever is looking to unload a business that is dragging down its bottom line. Analysts estimated the division could sell for between $7.5 billion and $8.5 billion.
Kraft Heinz was unsuccessful in acquiring Unilever as a whole earlier this year, but analysts have long known about the company’s European aspirations. An acquisition like this might be a good start. It’s obviously done its due diligence on Unilever considering the acquisition attempt. One potential obstacle for Kraft Heinz is that, like other food manufacturers, it is looking to boost slowing sales, and a declining business like spreads and margarine may be hard to turn around or add enough to meaningfully boost revenue.
Unilever is still working to keep shareholders happy after the Kraft Heinz rejection, doling out $5.3 billion on a share buyback program and increasing it dividend 12%. Talk of separating its food business also has been rumored. Polman has said Unilever needs to accelerate its plans to unlock further value faster and it would speed up a cost-savings plan, targeting a 20% underlying operating margin by 2020. A sale of its spreads and margarine business is likely to be just the beginning of big changes at the Anglo-Dutch conglomerate.