Colgate Wraps Up Sanex Buy

U.S. consumer goods conglomerate Colgate-Palmolive Co. (CL - Analyst Report) announced the completion of the acquisition of the Sanex personal care brand from Unilever NV (UN - Analyst Report). The deal had cost the company $952 million.

The acquisition supports Colgate’s objective of expanding in the high-margined oral care and personal care businesses. Sanex is particularly a good opportunity for Colgate to grow its deodorant and body wash business overseas. The brand has 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.

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.

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