Unilever to buy Sara Lee personal care brands

Unilever is to add Radox bubblebath and Brylcreem hair gel to its brand portfolio after agreeing to buy Sara Lee's personal care business for €1.27bn ($1.9bn) in cash.

The acquisition, the first one made with the direct involvement of new chief executive Paul Polman, is designed to strengthen Unilever's position in skin cleansing and deodorants in Europe.

The Sara Lee portfolio includes Sanex handwashes, shower gels and deodorants as well as the Dutch personal care brand Zwitsal and German brand Duschdas.

Unilever said the brands would compliment brands like Lifebuoy soaps and Dove deodorants. It will also pick up some laundry brands like Biotex (which is sold in Denmark and the Netherlands.)

Analysts at Credit Suisse said the brands were not "the greatest collection of assets" but the acquisition showed Unilever was becoming more proactive in driving volume growth.

People close to Unilever said the company is more willing to make acquisitions now that it has undertaken extensive internal restructuring. "They really feel their house is in order so their ability to integrate these deals is great," said one person.

The business has sales of some €750m, and earnings before interest, depreciation and amortisation of €128m, making the value of the deal a reasonable 10 times ebidta.

Sales of the business have been growing at 4 per cent over the past three years, ahead of the overall market. Around 40 per cent of the sales are in skin cleansing, followed by 20 per cent in deodorants.

The UK is the biggest market for the Sara Lee business, followed by the Netherlands, with around 15 per cent of sales in emerging markets such as the Philippines and South Africa.

"There is a big opportunity to roll out these brands across their entire emerging market business," said Warren Ackerman, analyst at Evolution Securities, adding that the deal will also increase Unilever's European skin cleansing market share from 13 per cent to 23 per cent and increase its leadership position over Colgate, Henkel and Beiersdorf.

Unilever said most of the Sara Lee brands were in the value and mid-tier price range, helping to broaden its price range. Dove costs more than Sanex, and Mr Polman has said that Unilever needs to "stretch" its brands up and down the price ladder to attract value-conscious consumers.

Sara Lee decided to sell its personal care and household business, which contribute some 17 per cent of total revenues, about six months ago as part of a turnround plan to transform the US group into a smaller, more focused company.

Unilever only bought half of the Sara Lee business up for sale. "We never bid for the whole," said one person close to the company. "It was a deal made to Unilever's terms." Brands remaining with Sara Lee include Kiwi shoe polish, Ambi Pur air fresheners and Ridsect insecticides.

Unilever was advised by JP Morgan. Sara Lee is being advised by Goldman Sachs.

Unilever's shares have risen 32 per cent over the past six months, slightly ahead of the FTSE 100 index. Yesterday its shares were down 2p at £17.34 in early morning trading.

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