Unilever tea auction set to close second round in November

Goldman Sachs and Centerview are running the sale of the tea brands, which include PG Tips, Pukka and T2. The first round of the sale process was in September.

One of the sources said binding offers are due at the end of November. The second source said that the precise date has – as of last week – yet to be finalised.

PE fund Advent is in the best position to win the auction, a third source said, but another source said there is no frontrunner. Three other bidders remain: Cinven, CVC and Carlyle, although these PE investors all have ESG-related concerns about Unilever's supply-chain exposure to countries such as Pakistan and Iran, he said. Another source argued that the bidders are instead preoccupied with the growth outlook for black tea.

Advent has been working with Singaporean sovereign wealth fund GIC on this process, and Cinven is working with Abu Dhabi's Adia.

A fourth source said KKR and Blackstone explored bids in the first round but decided against getting involved.

Indeed, it is a difficult asset to sell because – outside India and Indonesia – the market for black tea is a low-growth one, and Unliver's US joint venture with Lipton means the winner will be unable to sell ready-to-drink products in the US under the current branding, the fourth source said.

Performance is another concern, a fifth source said. Despite there being a sell-side staple on Unilever tea at 6.75x on EUR 630m EBITDA, the underlying figure stretches some buyers' credulity, he said. The group of brands being sold collectively reported sales of around EUR 2bn in 2020, and was expected to be marketed based on EBITDA of EUR 350m-400m, to fetch a multiple of 10X EBITDA, and realise an enterprise value approaching EUR 4bn.

Unilever, Advent, CVC, Carlyle and Cinven declined to comment. KKR and Blackstone did not respond for comment.

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• Topics
• Buyouts
• Consumer
• UK / Ireland
• Advent International
• CVC Capital Partners
• Cinven
• Carlyle Group