LONDON • From black tea to bottled water, European companies are taking a hard look at underperforming businesses at a time when investors’ profit expectations are already low because of the coronavirus pandemic.
With economies reeling and Covid-19 still spreading across swathes of the globe, top executives are hiring investment bankers or launching internal reviews to sort through portfolios and sell unwanted businesses.
“Investors are writing off 2020 completely but expect a tight, impeccable story for 2021 and 2022,” said Adam Young, the global head of capital markets at advisory firm Rothschild and Co. “Those companies that don’t have one need to look for it pretty quickly.”
Private equity firms from KKR and Co to Blackstone Group Inc are lining up bids for Unilever plc’s tea unit, which could fetch more than £5 billion (RM26.45 billion), people familiar with the matter told Bloomberg News last week.
The consumer-goods giant launched a strategic review of the unit in January, as the coronavirus was rampaging through China’s Hubei province. At that time, CEO Alan Jope described the business, which includes well-known brands like Lipton and PG Tips, as “a structural drag on Unilever’s growth”.
In a similar vein, Nestlé SA is considering a sale of its US mass-market bottled water business, which includes the Poland Spring and Pure Life brands. The division globally had its worst performance in a decade last year and the North American unit, in particular, has seen competition from discount brands, as well as consumer resistance to plastic packaging.
It is not only big consumer companies looking to act. Total SA and Solvay SA are each pursuing sales of chemical businesses, people familiar with the plans have said. AMS AG may be positioning Osram Licht AG’s automotive unit for a sale once its takeover of the German lighting company is complete, according to a worker’s representative and an internal presentation.
Such carveouts may pick up in the second half as companies seek to bolster balance sheets, as well as share prices, in the wake of the pandemic. — Bloomberg