Unilever could sell Entenmann's and Thomas' to finance acquisitions
Following its in-progress acquisitions Bestfoods and Ben & Jerry's Homemade, Inc., Unilever is rumored to consider selling off Bestfoods' cornerstone bakery brands, Thomas's and Entenmann's in order to pay down its debt.
In early June, Unilever's US$20.3-billion bid to acquire Bestfoods led to a merger agreement. (See related article, Done Deal. Bestfoods Accepts Unilever's Bid of $73/Share ).
Since then, Unilever agreed to sell its European Bakery Supplies Business (EBSB) to the Dutch food and ingredients company CSM nv for a 700 million euros (approximately US$669 million) in cash. The divestiture was no surprise, coming on the heels of a major acquisition expenditure and prior warning, (see related article, Unilever to sell European Bakery Business ), as well as the late-March announcement that the European bakery operations were under review. Final approval by the Anglo-Dutch Unilever conglomerate's board of directors is expected to come in early October.
The company has also been restructuring its Canadian businesses to save money.
Bestfoods' Thomas' English Muffins and Entenmann's cakes, which together are estimated to have $1.7 billion in annual sales, could follow CSM nv by being sold if, or when, the Bestfoods acquisition is completed.
Earlier this year, after acquired Slim-Fast and Ben & Jerry's Homemade Inc. brands, followed by a downgrade by Moody's Investors Service, which reportedly cut Unilever's debt ratings three notches, from AAA to A1. The move raises the cost of financing for Unilever, which may yet seek to acquire additional businesses.
And so some in the financial community believe Unilever will seek to sell-off some "non-core" businesses to the tune of $5 billion to $6 billion, to raise their debt rating. The Bestfoods baking division could come to represent a large minority chunk of that figure.
Mexico's Grupo Industrial Bimbo SA de CV and Campbell Soup Co., which owns the Pepperidge Farm brand, are rumored to be potential suitors. The Bestfoods brands could bring added distribution for the winner of the bidding—including a well-developed direct-store delivery operation.
General Mills Inc., which just acquired Pillsbury, could also be in the running. (See related article, General Mills to Acquire Pillsbury for US$10.5 Billion ). However, if one of these companies acquires Keebler Foods, which is currently being divested by majority owner Flowers Industries, attention could be diverted from Thomas' and Entenmann's. (See related article, Kellogg Co. among the latest rumored Keebler suitors).
More Unilever movings and shakings…
• Last week, Unilever named Charles Strauss as its new president and CEO for all U.S. operations. Strauss will continue as president of Unilever Home and Personal Care-North America. He succeeds Richard Goldstein, who has taken the chairman and CEO position at International Flavors and Fragrances Inc.
• Also last week, reports circulated that Unilever might also sell its Batchelors dried foods operations, which include Bachelors range, which includes Cup a Soup, SuperNoodles and Bean Feast brands. The reason: Possible European antitrust pressure from the European Commission.
• Earlier in August, Unilever, to refinance the Bestfoods acquisition and its $22-billion loan, was repored to issue between $7 billion and 8 billion in short-dated debt in the Eurobond market.
• Also, Unilever during the first week of August acquired the Sense margarine brand in a brands swap with private Dutch firm Van Dijk Food Products. Unilever's Van den Bergh Nederland produce Sense products and merge the business with a diet margarine called Becel. Van Dijk will take over Van den Bergh's frying fat brand, Diamant.
• Finally, Unilever began the month by splitting its global divisions into two, one for food products and the other for home and consumer care products.
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Edited by Bob Sperber