Unilever looks to sell Chicken Tonight brand

by Louise Lucas - 30/09/2010

"Unilever is to sell its Chicken Tonight brand as it continues to shake up its food portfolio and forge deeper into personal care."

The deal comes as the Anglo-Dutch conglomerate agreed to pay $3.7bn for Alberto Culver, the US consumer products group whose brands include TRESemmé and VO5 shampoos. It also follows just months after the sale of its Italian frozen food business to Permira, the private equity-owned group which had already bought most of the other European frozen food operations, Birds Eye and Iglo.

EDITOR’S CHOICE
Unilever looks to clean up - Sep-27Lex: Unilever / Alberto Culver - Sep-27Unilever pays $3.7bn for Alberto - Sep-27Video: Has Unilever paid too much? - Sep-27In depth: Mergers and acquisitions - Sep-26Unilever gloomy on outlook for growth - Aug-05Chicken Tonight – whose advertising jingle was immortalised in an episode of The Simpsons – and fellow sauce brand Ragu in the UK and Ireland are expected to fetch about £30m-£40m. The Ragu international business remains with Unilever and even in the UK and Ireland only the brand is being sold; no people or manufacturing assets are included.

As such, the asset is most likely to attract interest from companies in the same industry or private equity buyers who already have sales and marketing teams in place. Potential buyers include private label manufacturers; it is possible Premier Foods, in spite of its debt issues and pension deficit, may be interested.

Sales of jars of Chicken Tonight, which comes under the Knorr brand acquired by Unilever through its merger with Bestfoods in 2000, have slumped in recent years and the brand’s image has grown stale. Potential buyers’, however, may focus on the stable cash flow generated rather than the sagging sales. There is also scope to reverse the latter by introducing new flavours.

“It’s a commentary on the UK market,” said one observer. “It’s been a declining business: it’s a pretty pedestrian brand, whereas in the US [Ragu] probably still has some resonance.”

Unilever said: “We are assessing strategic options for Chicken Tonight and Ragu in the UK and Ireland. We regularly evaluate the performance of our brands in the market place and we will consider all options when reviewing their future.”

Food still makes up more than half Unilever’s revenues, and it continues to make acquisitions in the area, mainly in emerging markets.

However, Unilever has also been pushing more aggressively into personal care, which commands higher margins and offers superior growth. Unilever’s personal care business generated operating margins of 15.5 per cent last year versus 12.6 per cent for the group as a whole.

Similarly, personal care sales have been growing at roughly double the pace of some food and beverages and a bigger multiple still of staples such as spreads.

Those dynamics lie behind the Alberto Culver deal and the $1.9bn acquisition of the European personal care division of Sara Lee, which regulators are due to pronounce on next month.

Unilever is being advised by Spayne Lindsay & Co on the deal.

More Details: http://www.ft.com/cms/s/0/f5b1aaba-cbbe-11df-a4f5-00144feab49a.html