Shearman & Sterling and Mori Hamada & Matsumoto are advising Japan’s Mizkan Group on its agreement to buy Unilever’s Ragu and Bertolli pasta sauce brands for $2.15 billion.
The all-cash deal, which values the sauce business at 3.6 times its annual sales, boosts the Japanese condiments maker’s presence in North America’s grocery aisles.
The sale of those operations, plus the recent disposals of Skippy peanut butter and Wishbone salad dressings, will complete the restructuring of Unilever’s North American portfolio, the company said, as the group sharpens its focus on its most profitable products.
Unilever, which is being advised by Cravath, Swaine & Moore, still owns food brands such as Ben & Jerry’s ice cream, Knorr soups and Hellman’s mayonnaise.
Deutsche Bank analyst Harold Thompson told Reuters he expects Unilever to continue to make modest food disposals, though he did not name specific brands.
“The key is for the dilution of this disposal strategy to be offset by the enhancement of acquisitions in [home and personal care] markets for it to be a success over the long term,” Thompson said.
Unilever has been vocal about its desire to focus more on personal care brands, which enjoy higher margins and growth in emerging markets.
For Mizkan and rival Asian groups, however, the deal steps up a shift towards Western markets, spurred by slowing domestic growth and cash-heavy balance sheets.
Mizkan already had Britain’s Branston Pickle and Sarson’s vinegar in its growing larder and fellow Japanese group Suntory Holdings closed a $16 billion takeover of U.S. bourbon company Beam Inc last month, following last year’s agreement by Suntory Beverage & Food to buy UK drinks Lucozade and Ribena from GlaxoSmithKline.
Mizkan, which says it is the world’s leading provider of rice wine vinegar, already owns U.S. cooking wine brand Holland House and Border Foods, which makes Mexican sauces and peppers.
The pasta sauce business gives it additional annual turnover of more than $600 million and the leading brand in a market with annual sales of $2.3 billion.
The deal is expected to close by the end of June and is being financed by the proceeds of a new fully committed financing facility.
