Unilever Plc. (UL) has decided to offload some of its hair care brands that it had bought from Alberto Culver in 2010, to settle matters with the U.S. Department of Justice. This has been necessitated in order to conform to the anti-monopolistic measures undertaken by the U.S. government, which felt that the Alberto Culver acquisition has given Unilever control of many important hair care brands in the country which would curb competition to a great extent.
Unilever acquired US-based Alberto Culver Company for $3.7 billion in cash. With the acquisition, brands like TRESemmé, VO5, Nexxus, St. Ives and Simple were added to the company’s portfolio. These complemented the company’s own brands like Suave, Dove and Sunsilk.
The Department of Justice is of the opinion that the transaction would substantially lessen competition in three product markets, value shampoo, value conditioner and hairspray sold in retail stores. Value shampoos and conditioners are the lowest priced shampoos and conditioners sold in retail stores, typically selling for less than two dollars a bottle.
The acquisition would make Unilever owner of approximately 90% of the value shampoos and conditioners market. In the case of hairspray, Unilever’s post-merger share of the market would be approximately 46%, resulting in a highly concentrated market. This loss of competition would have resulted in higher prices for value shampoo and conditioner, and hairspray products.
To deal with the issue, the department proposed a settlement that would resolve the competitive concerns. Under the proposed settlement, Unilever was required to divest Alberto-Culver’s Alberto VO5 brand and Unilever’s Rave brand, as well as associated assets. The Alberto VO5 brand consists of value shampoo and conditioner, hairspray, mousse and other hair styling products. The Rave brand consists of hairspray and mousse products.
High Ridge Brands, a portfolio company of Brynwood Partners has emerged as an interested buyer of the Rave hairspray products and the U.S. portion of VO5 hair-care products.
Headquartered in London, Unilever manufactures and sells consumer products in more than 100 countries under brands such as Hellmann’s, Lipton, Surf, Dove, Suave and Vaseline. Unilever had sales of $62 billion in 2010. However, the presence of Procter & Gamble Co. (PG), a strong competitor, concerns us.
Unilever holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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