CVC Capital Bags $5 Billion Worth of Tea Properties from Unilever

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.

It took an oolong time — almost two years — but Unilever finally offloaded its unwanted portfolio of teas on Thursday.

The consumer goods giant agreed to serve a portfolio of tea brands to private-equity giant CVC Capital for $5 billion.

Checking the Tea Leaves

Unilever has been trying to divest businesses that are a drag on its portfolio — executives found themselves in hot water last year when turnover fell by 3.5%, and have remained there as the company's shares have lost 13% of their value this year. Its first crack at the problem was to sacrifice its line of beauty products, but no buyers bit on the $1 billion asking price.

The idea of selling the tea assets had been brewing for nearly two years — sales have slipped during the past decades as many consumers switched to alternatives such as kombucha, coffee, and herbal tea — and, on Thursday, a deal finally came through:

  • Unilever's Ekaterra unit, which contains 34 brands including Lipton, PG Tips, Pukka Herbs, and TAZO generating nearly $2.3 billion in revenue last year, will be sold to the Luxembourg-based CVC.
  • Unilever is holding onto its tea businesses in India and Indonesia, which pulled in about $1.15 billion last year in markets where tea consumption is boiling over.

Unilever's long-term goal is to focus on fast-growth areas, namely plant-based foods and nutrition, both of which helped its sales rise 2.5% in the third quarter. Several analysts suggested the company, which produces products as diverse as mayonnaise and soap, could be the target of activist investors who want to break it into more similar parts.

Social Concerns: The tea industry has long been associated with worker exploitation and human rights abuses, which multiple potential buyers expressed concerns about, according to the Financial Times. Unilever says it has programs in place to address those concerns, a major one being the ongoing automation of tea picking at its largest plantation, in Kenya.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More