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Ice cream division of Unilever seeks private equity investment

by Alice

Unilever, a prominent global consumer goods company, has embarked on a strategic move to divest its ice cream division, prompting engagement with private equity firms to gauge interest in the business.

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Advisors from Morgan Stanley and JPMorgan have initiated discussions with potential investors in the buyout market to explore interest in Unilever’s esteemed ice cream brands, including Wall’s, Magnum, and Ben & Jerry’s. Although talks are at a preliminary stage, the ice cream division holds significant potential, with estimations suggesting a valuation ranging between €10 billion to €15 billion, and even as high as €17 billion according to Barclays.

This development follows Unilever CEO Hein Schumacher’s recent announcement detailing plans to separate the ice cream business and streamline operations by reducing 7,500 jobs. While Schumacher has outlined intentions to list the ice cream business by the end of 2025, definitive decisions regarding the separation method remain pending, with a focus on maximizing returns for shareholders.

Unilever’s outreach to private equity firms commenced subsequent to the formal announcement, indicating a proactive approach to exploring strategic alternatives. Notably, the ice cream division, headquartered in the Netherlands, contributes approximately 16% to the group’s overall sales, underscoring its significance within Unilever’s portfolio.

However, potential complexities in the divestiture process have been highlighted, particularly concerning Ben & Jerry’s, which, despite its robust cash flows, may impact the overall valuation of the unit due to its vocal stance on political issues. Nonetheless, Ben & Jerry’s has reaffirmed its commitment to its mission amidst any ownership changes.

Unilever’s history of asset sales to private equity entities, such as KKR’s acquisition of its spreads business in 2017 and CVC’s purchase of its tea business in 2021, suggests a precedent for potential involvement in the ice cream division sale. With discussions hinting at CVC’s potential interest in bidding for the division, Unilever anticipates a streamlined focus on core businesses encompassing beauty and wellbeing, personal care, home care, and nutrition post-divestiture.

The decision to divest the ice cream division aligns with Unilever’s strategic realignment efforts, driven by a desire to optimize operational efficiency and revitalize growth prospects amidst evolving market dynamics. With billionaire activist investor Nelson Peltz’s involvement, Unilever remains committed to reshaping its portfolio to enhance shareholder value and sustain long-term competitiveness.

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