Unilever has said ciao to its Ragu and Bertolli pasta sauce business, agreeing to unload it to Japanese food manufacturer Mizkan Group for about $2.15 billion as the maker of Dove skin creams continues to shed food brands.
The deal transfers Ragu, the best-selling US pasta sauce that helped popularize Italian food in America, into the hands of a closely held Asian company founded 210 years ago. Together, the brands have annual sales of more than $600 million, London-and Rotterdam-based Unilever said today in a statement.
Under Chief Executive Officer Paul Polman, Unilever has focused on its health and beauty business while selling slower-growth food brands, mainly in the US For Mizkan, the deal enhances its North American exposure, which it has been growing via acquisitions to reduce its reliance on the Japanese market.
“This transaction allows us to further achieve our objectives of diversification and expansion of our international footprint,” Kazuhide Nakano, chairman and chief executive officer of Mizkan Holdings Co, Mizkan Group’s parent, said in a statement. “Mizkan is strongly committed to the long-term growth of Ragu and Bertolli.”
Rice Wine
The food company, based in Japan’s Handa City, makes condiments including mustards and rice wine. The closely held company unveiled a five-year plan in January, saying it needs to expand overseas as the Japanese population shrinks. The company was founded in 1804 to make vinegar from the leftovers of sake production.
Today’s deal includes two US production facilities. In 2005, Mizkan bought Holland House cooking wines and in 2011 it purchased Border Foods, a processor of hot peppers.
The sale price represents a “healthy” multiple of 3.5 times sales, said Graham Jones, an analyst at Panmure Gordon. The after-tax proceeds for Unilever will be about 1 billion euros ($1.4 billion), he said in a note.
“Unilever needs to now demonstrate that with an improved performance in spreads it can reduce the growth drag from its foods division,” Jones said.
The maker of Axe body spray and TRESemme shampoo is the world’s leading maker of spreads like Flora and Country Crock, but unit sales in the division that includes spreads have declined for seven straight quarters.
Unilever said it expects to conclude the transaction by the end of June. Part of the proceeds will go to its 715-million pound ($1.2 billion) acquisition of share rights left in family trusts by one of the company’s founders nearly a century ago, which simplifies its stock structure, spokeswoman Lucila Zambrano said. Unilever announced that purchase three days ago. The company will also look for bolt-on acquisitions, she said in an e-mail.
“This sale represents one of the final steps in reshaping our portfolio in North America,” Kees Kruythoff, president of Unilever’s business in that region, said in a statement. Unilever is still looking to sell its Slim-Fast diet food business, which it put under review along with the pasta brands earlier this year.
Sauce Competition
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 International and Liberum Capital. Sales have declined 18% since 2009, hurt by the encroachment of private-label sauces, which now account for about one quarter of the market.
Still, Ragu is the best-selling sauce in the U.S., with 27% of the market, according to Euromonitor. Campbell Soup Co.’s Prego brand is second with 18%. Bertolli is the second-largest brand in the US premium pasta sauce market, Mizkan said.
Unilever sold Ragu in the UK in 2011, Skippy peanut butter and Wish-Bone last year, and its European meats business including the Peperami brand in February. It will continue to sell pasta sauces under the Raguletto brand in Finland, South Korea and other countries, and under the Knorr brand in Europe, Zambrano said.
Shares of Unilever were little changed at €31.94 at 9:29 am in Amsterdam.
Bloomberg
