Unilever PLC (LSE:ULVR)’s decision to offload its tea business may have had many Brits spitting out the contents of their morning cuppa but not US broker Jefferies.
“It's been a long time coming, but an important first step on ULVR's portfolio rationalisation journey has been taken,” the broker said.
Assuming the money from the sale is used to pay down debt, Jefferies thinks the €4.5bn disposal of its Developed Market Tea business, which includes the PG Tips and Lipton brands, will dilute earnings per share by around 2%.
“€4.5bn is solidly in line with reports by Sky News towards the end of September and equates on our estimates to 2.4x sales and 14.5x EBITDA [underlying earnings], the latter a higher multiple than the 11-12x we had assumed,” Jefferies revealed, as it repeated its ‘buy’ recommendation.
Less sanguine about the disposal to private equity group CVC Capital Partners, was the union, Unite, which warned the decision could end up as “another case of corporate betrayal”.
The union was not slow to highlight the private equity firm’s involvement in the demise of Debenhams, the department store chain.
“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,” said Sharon Graham, Unite's general secretary.
“Unite will be demanding urgent meetings with management to ensure solid safeguards are 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,” she said.
Shares in Unilever were up 1.2% at 3,868.5p after the group announced yesterday tea-time that it had found a buyer for the business.