Following the approval of the US Department of Justice (DOJ), Unilever Plc. (UL) has consummated the sale of the Alberto VO5 brand in the United States and Puerto Rico and the Rave brand globally to private equity firm Brynwood Partners VI L.P. However, terms of the deal were not disclosed.
The deal was done to offload some of the hair care brands 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 completed the acquisition of US-based Alberto Culver Company on May 10, 2011 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.
Following the acquisition, Unilever became the owner of approximately 90% of the value shampoos and conditioners market. In the case of hairspray, Unilever’s post-merger share of the market was approximately 46%, resulting in a highly concentrated market.
The DOJ realized that this would be inimical to competition and increase the prices for value shampoo and conditioner, and hairspray products. Additionally, 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.
Consequently, the department proposed a settlement and required Unilever 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. However, the Alberto VO5 brand will remain in Unilever’s portfolio outside the United States and Puerto Rico.
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.
PROCTER & GAMBL (PG): Free Stock Analysis Report
UNILEVER PLC (UL): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment