LONDON — Unilever, the maker of Dove soap, has agreed to buy Alberto Culver Co. for $3.7 billion in cash to add VO5, Nexxus and TRESemme hair-care products in the company’s biggest purchase in a decade.
Alberto Culver, based in Melrose Park, Ill., said Monday that Unilever will pay $37.50 a share. That’s about 19 percent more than Friday’s closing price. The purchase will add to earnings per share in its first year, Unilever said separately.
The purchase makes Unilever the biggest maker of hair-conditioning products in the world, the second-largest in shampoo and the No. 3 in styling, the company said.
Chief Executive Officer Paul Polman is expanding in home and personal-care products as part of a plan to double total sales. Unilever spent much of the decade shedding brands after the 2000 purchase of Bestfoods. Polman, who joined in 2009after a career at Nestle and Procter & Gamble Co., agreed to buy Sara Lee Corp.’s bodycare operations last year.
“It’s a sensible deal, has good strategic rationale and is positive, but it’s not transformational - it’s a bolt-on deal like the Sara Lee one,” said Martin Deboo, an analyst at Investec Securities in London.
Alberto Culver had sales of $1.6 billion and earnings before interest, taxes, depreciation and amortization of $250 million for the 12-month period ending June 30, according to Unilever. The Rotterdam- and London-based company offered about 14.75 times Alberto Culver’s earnings before interest, taxes, depreciation and amortization, Bloomberg data show, and is paying 2.31 times revenue on that basis. Unilever offered to pay 1.7 times annual revenue for the Sara Lee business.
“Growth is significantly higher for this company compared with Unilever, but it’s a lot of money,” said Corne van Zeijl, a senior fund manager at SNS Asset Management in the Dutch town of Den Bosch. “You’re only buying a limited amount of emerging market exposure.”
Alberto Culver’s third quarter sales rose 11 percent, excluding the effect of currency fluctuations and acquisitions.
Unilever is aiming to expand outside of western Europe, the only region where its sales fell in the first half, amid sluggish consumer spending and increasing competition from rivals including Procter & Gamble and Nestle. Alberto Culver made about 64 percent of its sales in the United States in the year ending September 2009, according to Bloomberg data. The acquisition will enable Unilever to extend the Alberto Culver brand’s presence to “new emerging markets,” Unilever said.
“It’s what they promised,” van Zeijl said. “They say they want to expand in emerging markets and it fits well.”
Unilever entered the professional hair-product market in 2009 with the purchase ofthe TIGI salon brands from the creators of Toni & Guy for $411.5 million. The Alberto Culver acquisition includes Simple, a skin-care company it bought in 2009 for about $380 million.
Personal care now represents 30 percent of Unilever’s sales compared with 20 percent a decade ago, Polman said. The unit had underlying sales growth of 7.8 percent in the second quarter, Unilever said in August, more than twice the pace of the group.
In August, Polman said that he foresaw about 80 percent of so-called organic growth coming from emerging markets, driven by health and personal care. The global personal care market is forecast to grow to $561 billion by 2014, and was valued at $467.3 billion in 2009, according to Datamonitor.
“It’s therefore easy to see why companies are targeting this lucrative industry as an opportunity for growth,” Mark Whalley, an analyst at Datamonitor, said Monday in a note.
Business, Pages 24 on 09/28/2010