Unilever Is Overpaying for Alberto-Culver, Analyst Says

(Unilever, Alberto-Culver story updated with analyst commentary)
NEW YORK (TheStreet) -- Consumer goods giant Unilever's(UL) agreement to buy Alberto-Culver(ACV) for $3.7 billion in cash has been met with mixed reactions from the analyst community.

Goldman Sachs analysts took a largely positive tone about the transaction, which they said, if completed, "would help to consolidate a still-fragmented hair care industry in the U.S." In a client note, Goldman Sachs analysts Andrew Sawyer and Stephanie Whited cited ACNielsen as saying that a combined Alberto-Culver and Unilever would have a dollar share of U.S. hair care of 19%, compared with P&G's(PG) 29% and L'Oreal's 23%.

They added that outside the U.S., Unilever's "breadth and scale" could help rev up the geographic growth of Alberto-Culver's TreSemme and Nexxus brands.

Morningstar on the other hand, conveyed a more cautionary tone about the transaction, saying that Unilever is paying a 34% premium to Morningstar's fair value estimate for Alberto Culver, and roughly 2.3 times sales and 14.8 times trailing-12-month EBITDA. "While the purchase price is unlikely to move the needle on our valuation of Unilever, we believe the firm is overpaying for growth and we're putting our fair value estimate for Unilever under review," Morningstar analyst Lauren DeSanto said in an equity research report.

De Santo said whether the deal ends up being worthwhile depends on Unilever's ability to "take Alberto's brands and slot them into the white spaces of Unilever's portfolio in new markets."

DeSanto expects the deal to go through.

Under the deal, announced on Monday, Unilever will acquire all outstanding shares of Alberto-Culver for $37.50 a share in cash, representing a premium of 33% to its 12-month volume weighted average share price and an 18% premium to its all-time high closing share price achieved earlier this year.