LONDON— Unilever UL +0.33%PLC has agreed to sell the bulk of its tea business to CVC Capital Partners for €4.5 billion, equivalent to more than $5 billion, the consumer-product giant’s latest move to jettison slower-growing parts of its business.
Unilever is currently the world’s largest tea maker, with brands including Lipton, Brooke Bond and PG Tips brands. However, the London-based company said in January 2020 that it was exploring a possible sale of the business after struggling for years to boost growth as consumers in developed markets such as the U.S. and Europe increasingly favored coffee and other drinks over black tea.
On Thursday, Unilever said the sale of the tea business was part of its broader strategy to focus its portfolio on higher-growth categories. The company has come under pressure of late to revive growth, with its share price falling over the past year and analysts saying it has underperformed rivals during the pandemic in areas such as hygiene and packaged food.
The company, which owns Dove soap, Hellmann’s mayonnaise and Ben & Jerry’s ice cream, has in recent years sought to accelerate growth by buying up a range of businesses in on-trend categories. Those have included plant-based foods brand Vegetarian Butcher, healthy snacks maker Graze, and a string of upscale skin care and vitamins brands.
At the same time Unilever has looked to sell off slower-growing parts of its portfolio. For instance, it sold its struggling margarine-and-spreads business to KKR & Co. for roughly $8 billion in 2018.
Unilever also this year explored the sale of a group of slower-growing beauty and personal care brands, including Q-Tips, though recently shelved that effort after failing to drum up enough interest.
The tea business being sold to CVC generated revenue of about €2 billion last year, roughly level with the prior period. Tea revenues make up close to 4% of Unilever’s overall sales.
CVC will take control of 34 tea brands, 11 factories and Unilever’s tea estates in three countries. However, Unilever is keeping its tea business in India, Nepal and Indonesia, where the Lipton brand is popular, and retaining its ready-to-drink ice tea joint venture with PepsiCo Inc.
The private-equity firm beat out competition for the tea business from rival buyout shops including Cinven Group Ltd., Advent International and Carlyle Group Inc., according to people familiar with the matter.
Private-equity firms, flush with record amounts of cash, often bet they can operate businesses that are carved out from parent companies more efficiently, partly by bringing greater focus and resources.
Still, Unilever’s decision to retain parts of the tea business considered by analysts to have the best growth prospects deterred other private-equity firms from participating in the auction or bidding aggressively, some of the people familiar with the process said.
RBC analyst James Edwardes Jones said he thought the price Unilever had received for the tea business was “slightly disappointing.”