Private equity firm CVC has agreed to buy Unilever’s tea arm for £3.79bn (€4.5bn), it has been announced.
CVC outbid rivals Advent and Carlyle after an auction process, Unilever confirmed on Thursday.
The tea business, ekaterra, includes household names such as PG tips and Lipton, among a portfolio of 34 brands.
Alan Jope, CEO of Unilever said the conglomerate was looking forward to seeing the business “prosper under CVC’s ownership.”
“The evolution of our portfolio into higher growth spaces is an important part of our growth strategy for Unilever. Our decision to sell ekaterra demonstrates further progress in delivering against our plans,” he added.
Unilever, which also owns Dove and Ben & Jerry’s, has been reviewing its options for its tea business since 2019, after demand for black teas has dropped.
Completion of the deal is expected in the second half of 2022.
The pandemic had given the tea category “a very significant boost,” according to Alex Smith, global sector lead at Third Bridge.
“In more developed economies, where lockdowns are evolving into hybrid working, people are spending a lot more time at home and this is driving a spike in tea consumption. How long this trend will last depends on how sticky you think hybrid working will be,” Smith explained.
The deal excludes Unilever’s tea business in India, Nepal and Indonesia, as well as the company’s interests in the Pepsi Lipton ready-to-drink Tea joint ventures and associated distribution businesses.
Third Bridge’s experts believe India was excluded from the deal because tea is “integral” to the performance of Unilever’s Indian business.
“India is also where Unilever has by far the most material minority shareholding. Indonesia is another location where Unilever has a significant minority,” Smith added.