Archer Daniels Midland (ADM) could be prepared to pick off part of Unilever’s unwanted spreads business.
The division, which includes brands such as Flora and Stark, was put up for sale in April as a result of the corporate review that emerged from Kraft Heinz’s failed takeover bid.
The Anglo-Dutch company also instigated a share buy-back programme worth €5 billion as part of its corporate review, and will look at that dual-headed structure, which involves it being listed in both the Netherlands and the UK.
According to the Sunday Times, ADM is interested in the food processing operations of Unilever’s spreads business – and could team up with a private equity group in order to make the investment more viable.
The American business has enlisted advisors from Barclays in order to explore the move further.
It’s not clear how far ADM’s interest extends, or whether it would encroach on the branded side of the spreads business, which could otherwise be split between category leaders like Arla, Dairy Crest or even Kraft Heinz itself. But the most likely suitor for those brands would be a private equity group Clayton, Dubilier & Rice and Bain Capital mooted by the Times as potential joint bidders.
Unilever is selling up because spreads continue to perform poorly, recording a decline in 2016 when growth in emerging markets was offset by disappointing performance in more developed ones.
In its trading update this April, Unilever took the unprecedented step of providing separate figures for its food business with spreads excluded. Those numbers provide a glimpse into Unilever’s business beyond a potential sale, but also underline the troubles facing the brands, which also include Bertolli and I Can’t Believe it’s So Good.
With spreads included, Unilever’s underlying sales growth across food and refreshments was 2.2% – driven largely by refreshments. But take the troubled spreads away and sales growth leaps to 3.5%. That shows the problem facing Unilever, with consumers slowly ebbing away from the margarines category amid changing perceptions of margarine.
Spreads is an €800-million-a-quarter category for Unilever, warranting an asking price for the spreads business of £6 billion.
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