Unilever's Acquisition of Sara Lee Detergents Business Faces EU Objections

Unilever’s planned acquisition of Sara Lee Corp.’s shower-gel and European detergents business for 1.3 billion euros ($1.67 billion) faces formal objections from the European Union’s antitrust regulator.

The company received a statement of objections from the EU, Paul Matthews, a London-based spokesman for the company, said in an e-mail today. He said the company remains confident that a “positive agreement” can be reached by the end of the year. He declined to comment on what issues the EU raised in the documents, which are confidential.

The European Commission, the 27-nation EU’s antitrust agency, in June extended its review of the transaction saying it “creates significant overlaps in a number of products” such as deodorants, skin cleansers and fabric-care goods. Unilever, the world’s second-largest consumer-goods maker, is seeking to buy the Sara Lee lines to focus further on international brands.

“I presume some small divestments will be needed to get the job done,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich today. He said the EU statement could delay the deal from closing “which delays the contribution to the sales and profitability from the purchase.”

Fourth Quarter

Unilever, the London- and Rotterdam-based maker of Dove soap and Lipton tea, earlier this month said it expected the purchase to be completed in the fourth quarter, later than the third-quarter timeframe previously announced. Amelia Torres, a spokeswoman for the EU antitrust regulator in Brussels, said she couldn’t comment.

Ernesto Duran, a spokesman for Downers Grove, Illinois- based Sara Lee, said while the company hadn’t been contacted by the European Union, it was “aware of the recent developments.”

“We share Unilever’s confidence that a positive agreement can be reached by the end of the year,” he said in an e-mailed statement.

Unilever fell 1.9 percent to close at 21.02 euros in Amsterdam trading.

A statement of objections doesn’t necessarily mean the EU will attempt to block the deal. The EU approved TomTom NV’s purchase of digital-mapping company Tele Atlas NV in 2008 a few months after sending a statement warning that the purchase might violate antitrust rules.

Remedies

Unilever has two weeks to respond in writing to the objections and can ask for an oral hearing to defend the deal. It can still offer remedies to soothe the commission’s concerns, such as selling off units to reduce market share in problem markets.

Paul McGeown, a partner at Hunton & Williams LLP in Brussels, said EU statements, formal charge sheets laying out potential competition worries, are becoming more common during extended merger reviews. He said regulators tend to “throw the kitchen sink” at companies after court rulings urged them to list all concerns.

“I would expect Unilever to put up a robust defense” and argue that supermarkets’ negotiating power makes it hard for consumer-goods makers to raise prices, McGeown said.

Unilever’s Chief Executive Officer Paul Polman last year broke the company’s nine-year streak of avoiding major takeovers with the Sara Lee purchase, which includes more than 90 brands in 19 European countries.

To contact the reporters on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net; Aoife White in Brussels at awhite62@bloomberg.net.

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