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Unilever to Divest Some Hair Care Brands

CAG HRL PF UN

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Consumer products giant Unilever NV (UN - Analyst Report) is focused on shaping its portfolio to deliver sustainable growth and thereby concentrate on its core portfolio. In order to do so, it has agreed to sell some of its brands in the hair care category to an international hair care company – Strength of Nature.

Per the deal, Unilever will sell its Soft & Beautiful, TCB and Pro-Line Comb-Thru brands to Strength of Nature for an undisclosed amount. The sale however excludes TCB’s business in Africa. The deal is expected to close in early December.

Strength of Nature is one of the fastest growing companies in the multi-cultural hair care category and boasts a number of leading brands including Profectiv MegaGrowth, African Pride, Dream Kids, Beautiful Textures and Elasta QP. Unilever’s Soft & Beautiful, TCB and Pro-Line Comb-Thru brands are a part of one of the fastest growing categories of Unilever’s personal care segment. It is expected to enhance the portfolio of Strength of Nature with leading hair care brands.

Of late, Unilever has been divesting its business to focus its resources on the core food portfolio. In early-Oct 2013, Unilever sold its Wish-Bone salad dressing business to food company Pinnacle Foods Inc (PF - Snapshot Report) for $575 million, while in Jan 2013, the company sold its Skippy peanut butter business to Austin, Minn.-based producer of branded food and meat, Hormel Foods Corporation (HRL - Analyst Report) for $700 million in cash. Last year, in August, ConAgra Foods Inc. (CAG - Analyst Report) bought its Bertolli and P.F. Chang's frozen meals brands for $265 million.

One more reason for this divestiture is that the markets in the developed countries are mostly saturated and the macroeconomic climate is not conducive. As a result, business in these markets has been sluggish and volumes disappointing. Therefore, the company is making a strategic move to optimize its resources and allocate them to more promising markets.

Unilever currently holds a Zacks Rank #3 (Hold).

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