Unilever agrees to sell PG Tips tea business
CVC’s purchase of ekaterra – which reported sales of €2bn (£1.68bn) in 2020 – will include iconic brands such as Lipton, Pukka, T2 and Tazo.
The deal is set to complete in the second half of 2022, subject to completion of works council consultation processes and the receipt of certain regulatory approvals.
However, the transaction excludes Unilever's tea business in India, Nepal and Indonesia as well as its interests in the Pepsi Lipton ready-to-drink tea joint ventures and associated distribution businesses.
Unilever chief executive Alan Jope said the sale of its ekaterra tea business was part of the company’s expansion plans, allowing it to focus on areas of higher growth.
Prosperous future
"We are proud of the place that our tea business has in our company's history,” said Jope. “We look forward to seeing ekaterra, with its strong brands and global footprint, prosper under CVC Fund VIII's ownership.
“I would like to thank our tea colleagues around the world for their passion and commitment to our tea business and wish them well for the future.”
John Davison, chief executive officer of ekaterra, said: "ekaterra is a strong business with positive momentum and has an exciting future ahead under the new ownership of CVC. We look forward to the next stage of our journey as the world's leading tea business."
Urgent talks
However, news of the sale of ekaterra to CVC prompted workers union Unite to call for urgent talks with Unilever. Unilever’s tea factory at Trafford Park, Manchester employs 300 of the union’s members across production and engineering roles.
Unite general secretary Sharon Graham feared the sale could go the same way as Debenhams, which shut its doors last year following its purchase by a private equity consortium, which included CVC Capital, TPG and Merrill Lynch in May 2006.
“The story of private equity buy-outs in the UK very often has a fatal pattern of debt loading, asset stripping and job cuts as short-term shareholder dividends soar,” said Graham. "We will not allow another case of corporate betrayal to ruin another iconic product."
‘So-called investment’
"The sorry consequences of CVC’s so-called ‘investment’ in Debenhams, which crashed last December, are there for all to see with hundreds of shops shut and thousands of jobs gone.”
Unite demanded management ensure solid safeguards were in place in relation to employee job security and their pay and conditions.
"We are determined that the new business has a secure future in the UK and is not further broken up for a quick profit. We will be seeking a cast iron guarantee, in particular, for the future of the Trafford Park site,” Graham added.
CVC acquired Formula 1
CVC Capital Partners also acquired Formula 1 in 2006, finally selling it to Liberty Media Corporation in 2017 for $4.4bn. Formula 1 continues to thrive.
Pev Hooper, a managing partner at CVC Capital Partners said: "ekaterra is a great business, built on strong foundations of leading brands and a purpose-driven approach to its products, people and communities. ekaterra is well positioned in an attractive market to accelerate its future growth, and to lead the category's sustainable development. We look forward to working with the team to realise ekaterra's full potential."
The future of Unilever’s tea business has been in question since the company announced a restructuring of the business in June 2020.
As noted at the time, Unilever considered a demerger of its tea business, as had been previous the case with its spreads business.
