Colgate to Add Sanex to Portfolio

U.S. consumer goods group Colgate-Palmolive Co. (CL - Analyst Report) with an objective to expand in the high-margin oral care, personal care and pet nutrition businesses adds one more brand to its portfolio by acquiring Sanex personal care brand from Unilever NV (UN - Analyst Report). The deal is expected to cost the company $940 million.

Sanex is a good opportunity for Colgate to grow its deodorant and body wash business overseas. Sanex is a brand with a distinct positioning around healthy skin with a strong market share in Europe. Sanex generated 2010 net sales of €187 million (approximately US$260 million), primarily in Western Europe.

Unilever, which purchased Sanex as part of its $1.7 billion acquisition of Sara Lee Corp.’s (SLE - Analyst Report) international toiletries unit, was forced to sell the brand due to pressure form the European Union. The European economic and political union raised concerns about competition issues in Europe compelling Unilever to shed Sanex.

Colgate, which earns more than 80% of its revenue from outside North America, will be able to build a strong platform of growth in key parts of the personal care market in Western Europe as a result of the transaction. The acquisition, which is subject to regulatory approval by the European Commission, is expected to close at the end of the second quarter of fiscal 2011.

Meanwhile, Colgate also agreed to sell its Colombian laundry detergent business to Unilever for $215 million. The disposition is part of the company’s strategy to hive off non-core portions of its portfolio.

Colgate estimates to add approximately 4% to its fiscal 2011 earnings attributable to a one-time gain from the sale of the detergent business. The company forecasts that the addition of the Sanex brand will contribute 1% earnings growth in fiscal 2012.

Colgate-Palmolive is a leading global consumer products company, tightly focused on Oral Care, Personal Care, Home Care and Pet Nutrition. We maintain our long-term “Neutral” recommendation on Colgate. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

For Unilever, we maintain our long-term “Neutral” recommendation. The quantitative Zacks #3 Rank (short-term Hold rating) for the company implies that the stock would trade sideways over the near term.

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