Unilever, the consumer products giant behind Dove soap, Rexona deodorant and Sunsilk haircare products, agreed Friday, Oct. 14, to buy an initial 82% of OAO Concern Kalina. The deal implies an enterprise value of around 25.9 billion rubles ($836 million) for Russia's largest domestic beauty products maker.
The Rotterdam- and London-based buyer said it is offering R4,098 per share, 86% more than the R2,198 closing price Thursday.
Once the initial 82% stake purchase is completed by the end of this year, Unilever plans to launch a mandatory tender offer at the same price for the rest of the Ekaterinburg-based maker of Silky Hands creams, Forest Balsam toothpaste and mouthwash and Black Pearl facial care.
Unilever said the enterprise value of the deal equates to twice Kalina's expected 2011 sales and 11.7 times Kalina's Ebtida before factoring in the synergies that will arise from the deal. Unilever CEO Paul Polman said the acquisition will give it leading positions in the Russian skincare and hair care markets, as well as establishing a presence in oral care.
"It will also strengthen and rebalance Unilever's portfolio and competitive position in Russia, an emerging market with considerable potential and one of our priority countries," he added in the statement.
Unilever has been in Russia since the early 1990s. It acquired the country's top ice cream maker, Inmarko, in 2008 and its leading ketchup producer, ZAO Baltimore, a year later, in deals whose financial terms were never disclosed.
Unilever is counting on Kalina's strong distribution network in Russia, Ukraine and Kazakhstan to expand in personal care, which accounts for more than 30% of the group's revenue compared with 20% a decade ago. Kalina employs around 1,900 people and projects 2011 sales of around R13 billion.
Only about 15% of Kalinia is in free float. Unilever has arranged to buy the 82% stake from various, unnamed investors. Providing it secures 95% of the share capital by the end of the second transaction, it can squeeze out any remaining shareholders.
Spokesman Trevor Gorin said Unilever expects the whole process to take about 10 months.
Kalina shares rose 40% in Moscow trading Friday to R3,072, for a market value of R19.8 billion. Kalina is almost 31%-owned by Cyprus-based Prego Holdings Ltd., according to Kalina's website. Unilever gained 2.9% in Amsterdam to trade at €24.76 ($34.19).
In a research note, analysts at Jefferies Inernational Ltd. said that although small for the Unilever group, the Kalina deal assists its expansion into personal care, which is growing faster and enjoys better margins than many food categories. Through the purchase Unilever becomes the No. 2 in the Russian personal care sector, up from No. 6, they noted.
"The deal doubles the size of Unilever's personal care business in Russia and gives Unilever the opportunity to use its R&D and innovation expertise to help drive incremental growth in the acquired local brands," they noted.
Goldman, Sachs & Co. advised Unilever.