Vestar Buying Unilever Laundry Unit

LONDON (Reuters) – Consumer goods giant Unilever Plc/NV agreed to sell its North American laundry business on Monday to private equity firm Vestar Capital Partners for about $1.45 billion to complete the bulk of its sell-off program.

The business makes Snuggle, Wisk and Surf products and the Anglo-Dutch company had been looking to sell it for almost a year in its struggle to compete as a distant No. 2 behind archrival Procter and Gamble (P&G) (PG.N: Quote, Profile, Research, Stock Buzz).

Vestar intends to fold the business into its Huish Detergents operations and re-name it Sun Products Corp, thus moving to No. 2 from third in the North American market and gaining scale needed to compete against Tide-maker P&G.

“We were sub-scale in North America, and saw bigger opportunities to invest elsewhere in Developing and Emerging (D&E) markets and also in Europe,” Keith Weed, Unilever's vice president for Home Care told Reuters.

Unilever is the clear number one laundry player in D&E markets, and equal number two with Germany's Henkel (HNKG_p.DE: Quote, Profile, Research, Stock Buzz) in Western Europe, both behind P&G.

Unilever shares rose 2 percent to 14.92 pounds by 0920 GMT in a largely flat London stock market.

“Given the length of the disposal process and poor retail volume trends in the business concerned, we view around 1.4 times sales and around 9 times estimated EBITDA (core earnings) as a good exit price,” said analyst Jeff Stent at brokers Citi.

He added that the disposal will further fuel expectations that Unilever will use its first-half results on July 31 to increase its 2008 share buyback guidance currently of at least 1.5 billion euros. Stent is looking for 2.4 billion euros.

Under the deal, Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz) (UNc.AS: Quote, Profile, Research, Stock Buzz) will get $1.075 billion in cash, plus preferred shares in Sun Products Corp worth $375 million and warrants offering the opportunity to buy up to 2.5 percent of the common equity of Sun Products.

The business being sold covers Unilever's laundry business in the United States, Canada and Puerto Rico with a annual turnover of around 1 billion euros and has a manufacturing plant in Baltimore, Maryland. The transaction is expected to close in 2008.

The sale is part of Unilever's previously announced plans in August 2007 to dispose of non-strategic brands with collectively more than 2 billion euros ($3.1 billion) in turnover, in which Unilever has sold or agreed to sell some 1.665 billion euros.

Unilever has sold French cheese business Boursin and agreed to sell U.S. marinades & spices business Lawry's, each of which have around 100 million euros of annual sales.

Last week, Unilever agreed to sell its Bertolli olive oil and balsamic vinegar business with annual turnover of 380 million euros, and has agreed to sell its Ivory Coast edible oil business with turnover of 85 million euros.

By David Jones

(Reporting by Mark Potter; Editing by David Holmes and Jason Neely)