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Consumer goods group Unilever Plc/NV will buy U.S. hair and skin care company Alberto Culver for $3.7 billion US in the latest move to rebalance its portfolio toward higher growth lines.
Unilever's biggest acquisition in a decade will add brands such as V05, TRESemme and Nexxus to Unilever's existing Dove and Sunsilk, and make it the world's leading company in hair conditioning and the second largest in shampoo.
Analysts said the price of the deal looked high but could be justified by as-yet unspecified cost savings and by skewing Unilever's business to more high growth, high margin categories compared to its other food and detergent businesses.
The acquisition follows a yet-to-be completed deal to buy
Sara Lee's body care division for $1.3 billion and will also mark Unilever's biggest acquisition since its massive Bestfoods deal in 2000.
"The initial consideration for Alberto Culver of 14.8 times EBITDA (earnings before interest, tax, depreciation and amortization) on the face of it looks quite punchy but we believe 'significant' but as yet undisclosed synergies will make the price look more reasonable," said analyst Graham Jones at brokers Panmure Gordon.
Unilever Plc shares rose 2.23 percent to 18.33 pounds by 1026 GMT in a little changed London stock market as other analysts said the deal will give Unilever greater hair care sales in the U.S. where it has struggled in recent years.
The deal will be Chief Executive Paul Polman's second big acquisition since he took over the helm at Unilever in January 2009, and both the Alberto Culver and Sara Lee deals are in personal care, the company's biggest and fastest growing business line.
"Personal care is a strategic category for Unilever and growing rapidly. Ten years ago it represented 20 percent of our turnover; strong organic growth has driven it to now reach over 30 percent, with strong positions in many of the emerging markets," Polman said in a statement on Monday.
Its brands will complement Unilever's existing brands like Dove, Clear and Sunsilk in hair care, and Pond's and Vaseline in skincare, and enhance Unilever's presence in emerging markets such as Mexico and also in the more mature markets of the U.S., Canada, Britain, and Australasia.
Unilever's proposed acquisition of Sara Lee Sanex deordorant and Radox bodycare business, first announced last September, is priced at around 10 times EBITDA, a relatively low price to reflect the disparate collection of brands being acquired.
The European Union is still examining the deal and is set to rule by Oct 26, and analysts expect Unilever to be required to divest some deodorant businesses to clear the deal which it hopes to complete in the fourth quarter..
Alberto Culver made annual sales of nearly $1.6 billion and EBITDA of over $250 million in the 12-month period ending June 30, 2010.
"Bolt-on acquisitions such as Alberto Culver supplement organic growth and add powerful new brands to our portfolio," Polman added.
The U.S.-based group has operations in nine countries, including the U.S., Canada, Argentina, Mexico, Britain, South Africa and Australasia. It has six manufacturing plants and employs around 2,700 people.
In another personal care deal, Britain's PZ Cussons said it had bought the tanning-products firm St Tropez from its private equity owner LDC for 62.5 million pounds.