March 3 (Bloomberg) -- Unilever is seeking bidders for its Ragu pasta sauce as the company sheds food brands, people with knowledge of the matter said.
The world’s second-biggest consumer-products maker has hired Morgan Stanley to sell the unit, said one of the people, asking not to be identified as the information is private. Unilever last week contacted many of the companies that were approached when the company sold Wish-Bone dressings last year and expects to sell the brand for between $1.5 billion and $2 billion, two of the people said.
HJ Heinz Co., the ketchup maker acquired by Berkshire Hathaway Inc. and 3G Capital last year, Kraft Foods Group Inc. and Pinnacle Foods Inc., which bought Wish-Bone last year for $580 million, are among the companies contacted, one of the people said. Representatives for Heinz, Kraft and Pinnacle declined to comment. Mary Claire Delaney, a spokeswoman for Morgan Stanley, and Unilever spokeswoman Lucila Zambrano also declined to comment.
For Ragu, a price of as much as $2 billion “would appear ambitious at first glance,” according to Oriel Securities analyst Chris Wickham.
Unilever fell 2.5 percent in Amsterdam trading today. The stock is down 4.3 percent in 2014.
The Ragu sale is part of Unilever CEO Paul Polman’s ongoing pruning of food brands. The London- and Rotterdam-based company sold the brand in the U.K. in 2011, Skippy peanut butter and Wish-Bone last year, and its European meats business including the Peperami brand last month. Polman said in December that the company would continue selling non-core assets this year. Unilever is also considering a sale of its Slim-Fast diet-food business, a person familiar with the matter said in January.
Founded in Rochester, New York in 1937 and acquired by Unilever in 1987, Ragu accounts for about 40 percent of Unilever’s $1.2 billion pasta-sauce sales, according to data tracker Euromonitor and Liberum Capital. Sales have declined 18 percent since 2009, hurt by the encroachment of private-label sauces, which now account for about one-quarter of the market. Ragu is the best-selling sauce in the U.S.
“They are looking to unload small non-core food businesses and this is a continuation of that process,” James Edwardes-Jones, an analyst at RBC Capital Markets, said by telephone.
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