Unilever Sells Units To Ici For $8 Billion

Anglo-Dutch food-to-consumer products group Unilever Plc /NV said on Wednesday it was selling its international speciality chemicals businesses to Imperial Chemical Industries Plc for $8.0 billion in cash.

ICI chief executive Charles Miller Smith hailed the deal as a way of transforming the company and removing its exposure to the cyclical downturns of heavy chemicals.

ICI chairman Sir Ronald Hampel said the deal would create a new ICI for the new century. The stock market greeted the deal, with ICI shares touching 760 pence before settling for a 33 pence gain at 747-1/2.

Unilever said the sale would result in an exceptional gain, before tax and expenses, of more than $5.0 billion, initially wiping out its net borrowings.

The businesses to be sold include National Starch and Chemical Co of the US, Quest International, Unichema International and Crosfield.

Miller Smith, formerly finance director to Unilever chairman Niall Fitzgerald, told Reuters ICI first looked at the speciality chemicals businesses almost 12 months ago to the week.

The acquisition was a genuinely unique opportunity to change (ICI) and create a lot of value, he said, shifting ICIs portfolio more towards less cyclical, light-end chemicals.

Even in the depths of recession these businesses held their profits, Miller Smith said, adding they were highly specific businesses focused on growing areas of the world such as Asia and Latin America and covered a whole range of end-user applications.

ICIs business is currently centred on bulk chemicals, paints and explosives.

Unilever put the units up for sale in February, and Miller Smith said ICI had been extraordinarily well-prepared to bring about an early deal.

He said over an 18-month search for a means to diversify ICI, the Unilever businesses kept cropping up as the best candidate.

Aside from lessening ICIs dependence on cyclical commodity chemicals, Miller Smith said the deal would broaden and deepen the groups management.

The Unilever National Starch unit is based in Bridgewater, NJ, and Quest and Unichemca in the Netherlands. Miller Smith said, The culture of ICI will not be an anglocentric, Millbank (London)-based one. It will be a combination of entrepreneurial US, gritty Dutch and Brits.

As part of the deal, National Starch president and chief executive James Kennedy will join the ICI board.

Miller Smith added that the selling and customer service skills in the Unilever businesses would complement ICIs existing strength in science and manufacturing.

Unilever chairman Niall Fitzgerald told Reuters the sale of all four businesses to a single buyer avoided a lengthy and potentially complex auction process. This was by far the best deal. One which was bankable now.

Otherwise it would have taken another three to six months and doing four deals rather than one would have been much more complex and not anything like as satisfactory for our employees and the businesses, said Fitzgerald.

He described the price offered by ICI, $8 billion in cash, as excellent and full and above a lower limit defined by Unilever, although he declined to disclose that limit.

When Unilever put the businesses up for sale in February, the process was expected to take several months but this has been cut short by ICIs pre-emptive offer.

Unlike other bidders, ICIs offer did not pose any regulatory hurdles because there were no real competitive issues at stake for the authorities, said Fitzgerald, and it safeguarded jobs.

About 20 bidders were due to enter the second round on Monday, he said, before parties submitted firmer offers in up to six months time.

We said in February that this was one outcome of our strategic review and that we wanted to move swiftly, which we have done. It now frees us up to get on with the next round of the strategy, said Fitzgerald.

The company plans to focus on its consumer goods which make up more than 90 percent of its business and in particular on developing and emerging markets, he said.

Unilever said the sale of the businesses represented a multiple of operating profit of 14.5 times and a multiple of earnings of 23 times.

ICI is funding the deal through an $8.5 billion five-year loan, but hopes to raise about three billion pounds ($4.9 billion) from disposals over the next three years.

As part of its strategy to shift its business profile toward speciality chemicals, ICI said it planned to sell its 62.4 percent stake in ICI Australia Ltd through a global equity offering. The stake is valued at about 1.0 billion pounds.

Unilever shares were up 13 pence in London after the news at 1660-1/2 but fell one guilder to 381 in Amsterdam. ($ = 0.611 British Pounds)