Unilever Agrees to Buy Alberto Culver for $3.7 Billion

Unilever, the maker of Dove soap, agreed to buy Alberto Culver Co. for $3.7 billion in cash to add VO5, Nexxus and TRESemme hair-care products in the company’s biggest purchase in a decade.

Unilever will pay $37.50 a share for the Melrose Park, Illinois-based business, Alberto Culver said in a statement today. That’s about 19 percent more than the closing price on Sept. 24. The purchase will add to earnings per share in its first year, Unilever said in a separate statement.

Chief Executive Officer Paulac Polman is expanding in home and personal-care products as part of a plan to double total sales. Unilever spent much of the decade shedding brands following the 2000 purchase of Bestfoods. Polman, who joined in 2009 after a career at Nestle SA and Procter & Gamble Co., agreed to buy Sara Lee Corp.’s body-care operations last year.

“It’s a sensible deal, has good strategic rationale and is positive, but it’s not transformational -- it’s a bolt-on deal like the Sara Lee one,” said Martin Deboo, an analyst at Investec Securities in London.

Shares of Unilever rose as much as 2.1 percent to 22.31 euros a share in Amsterdam and traded at 22.18 euros a share as of 12:18 p.m. The stock has lost 2.6 percent this year.

‘Massive Brands’

Alberto Culver had sales of $1.6 billion and earnings before interest, taxes, depreciation and amortization of $250 million for the 12-month period ended June 30, according to Unilever. Unilever offered to pay 1.7 times annual revenue for the Sara Lee business.

“It’s a perfect synergy because Alberto Culver is a midcap stock with some massive brands,” Victoria Collin, a London- based analyst at Atlantic Equities, said today. “TRESemme is the jewel in its crown and the sales are relatively high.”

The purchase makes Unilever the biggest maker of hair conditioning products in the world and the second-largest in shampoo, it said today. It will be the third-largest in styling.

Unilever entered the professional hair-product market in 2009 with the purchase of the TIGI salon brands from the creators of Toni & Guy for $411.5 million. The Alberto Culver acquisition includes Simple, a skin-care company it bought in 2009 for about 240 million pounds ($379 million).

“Personal care is a strategic category for Unilever and growing rapidly,” Polman commented today in the statement. “Ten years ago it represented 20 percent of our turnover; strong organic growth has driven it to now reach over 30 percent.”

Photographer: Jock Fistick/Bloomberg

Unilever Chief Executive Officer Paul Polman, at the helm for almost two years, has set a goal of doubling the company’s sales. Close

Unilever Chief Executive Officer Paul Polman, at the helm for almost two years, has set... Read More

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Photographer: Jock Fistick/Bloomberg

Unilever Chief Executive Officer Paul Polman, at the helm for almost two years, has set a goal of doubling the company’s sales.

Expansion

In August, the executive said that he saw about 80 percent of so-called organic growth coming from emerging markets, driven by the health and personal-care sector, which is “easier to do than with some of our food brands.”

Unilever is aiming to expand outside of western Europe, the only region where its sales fell in the first half, amid sluggish consumer spending and increasing competition from rivals including Procter & Gamble and Nestle. Alberto Culver made about 64 percent of its sales in the United States in the year ended September, 2009, according to Bloomberg data.

The mass-market haircare sector in the U.S. has been showing “low single-digit” declining growth, according to Collin. Alberto Culver’s third-quarter sales rose 11 percent, excluding the impact of currency fluctuations and acquisition, it said in July.

Divestments

The maker of Knorr soups on Sept. 24 agreed to sell its consumer tomato products business in Brazil to Cargill Inc. for about 260 million euros ($350 million). The company sold its Italian frozen-foods unit in July for about 805 million euros.

Unilever was advised by Morgan Stanley and UBS AG, according to spokesman Paul Matthews. BDT & Company was Alberto Culver’s financial adviser, while Credit Suisse Securities LLC provided a fairness opinion, the company said in a statement. The acquisition will be funded from existing cash resources.

To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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