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Unilever to Buy Slim-Fast, Ben & Jerry's

The deals are valued at over $2.6 billion.
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Updated from 9:53 a.m. EDT

Unilever

, a unit of the U.K.'s

Unilever PLC

(UL) - Get Unilever Plc Report

and the Netherlands'

Unilever NV

(UN) - Get Unilever NV Report

, said Wednesday that it has agreed to buy the seemingly disparate

Slim-Fast Foods

-- which makes a 220-calorie diet shake -- for $2.3 billion and

Ben & Jerry's Homemade

(BJICA)

-- which makes the 1,240-calorie-laden Chunky Monkey ice cream -- for $326 million.

The purchase of privately held Slim-Fast enables the second-largest maker of food in the world, behind Switzerland's

Nestle

TheStreet Recommends

(NSRGY) - Get NSRGY Report

, to expand its nascent health food business. Slim-Fast, based in West Palm Beach, Fla., controls 45% of the $1.3 billion nutritional supplement and weight management category, the fastest-growing food sector in the U.S.

"A lot of conventional beverage and food companies are looking for new avenues of growth, having tapped out on their own new product introductions," said Bonnie Tonneson, an analyst at

Chase H&Q

. "So they're turning to very, very strong brands that have an incredible consumer franchise but don't have the fuel to grow beyond niche opportunities." Increasingly, those brands are part of the health food market, which enjoys growth of 30% a year.

Witness Nestle unit

Nestle USA's

acquisition of closely held

Power Bar

, the manufacturer of energy and nutrition bars, in February and

Kraft Food's

purchases of PowerBar rival

Balance Bar

and privately held

Boca Burger

, a maker of soy-based foods.

Never mind

General Mills'

(GIS) - Get General Mills, Inc. Report

agreement to buy organic food product maker

Small Planet Foods

and

Kellogg's

(K) - Get Kellogg Company Report

purchase of

Worthington Foods

, which makes soy-based vegetarian items.

Tonneson estimated that the next acquisition candidate could be

Horizon Organic Holding

(HCOW)

, the leading producer of organic milk, based in Longmont, Colo.

Slim-Fast racked up net sales of $611 million and operating profits of $125 million for the year ended November 1999.

Additionally, Unilever, the largest maker of ice cream in the world with brands such as Breyer's and Good Humor, will pay $43.60 a share for all of Ben & Jerry's outstanding shares on a fully diluted basis. The transaction will be structured as a tender offer for all the shares of the company, which should commence next week.

Shares of Ben & Jerry's leapt 23%, or 8 1/8, to 43 1/16 in midday trading Wednesday. (Ben & Jerry's closed up 8 1/8, or 23%, to 43 1/16.)

The sometimes whimsical, often quirky South Burlington, Vt.-based ice cream manufacturer will now "benefit from Unilever's powerful distribution system internationally, which is the next frontier for them and their opportunity to grow to the next step," Tonneson said. "There is proven consumer interest and demand for them overseas." She rates Ben & Jerry's a buy and her firm has done no underwriting for the company.

"For shareholders, this is more than a fair price seeing as the company has been an operational disappointment for almost all of the 1990s," wrote Jeffrey Kanter, an analyst at

Prudential Securities

, in a research note. He rates Ben & Jerry's a hold and his firm has done no underwriting for the company.

He noted also that the biggest winner is Ben & Jerry's Chief Executive Perry Odak, who holds 67,000 options with a strike price of $24.625 and 360,000 options with a strike price of $10.88. At $43.60 a shares, his options are now worth $13.05 million, "which is incredible considering that BJICA has lost all sorts of share under his tenure," Kanter continued. Odak joined as CEO in January 1997.

The purchase of the company "takes us into the super premium category for the first time," said Antony Burgmans and Niall FitzGerald, chairmen of Dutch-Anglo Unilever, in a statement.

As for the liberal philosophical bent and socially responsible attitude of founders Ben Cohen and Jerry Greenfield -- the company contributes 7 1/2% of its pre-tax profit to charities -- Burgmans and FitzGerald added, "We are determined to nurture its commitment to community values."

Since the structure of the company will be the same, with Cohen and Greenfield still involved, "the social mission should stay intact," Tonneson commented. "I'm guessing that they wouldn't want anything to do with it otherwise."

Back in December, Ben & Jerry's disclosed that it had received a

bid from an unnamed potential acquirer, pushing its stock up 21% that day. Two weeks ago, Ben & Jerry's had considered a leveraged buyout plan that would have divided it between Cohen; venture-capital firm

Meadowbrook Lane Capital

, which characterizes itself as socially responsible; and Unilever. Under that plan, Unilever would have controlled about 28% of the company, with Cohen and Meadowbrook each holding 36%.

Unilever PLC was up 7/8, or 3%, to 28, while Unilever NV was up 1 3/8, or 3%, to 51 9/16. (Unilever PLC closed up 3/4, or 2.8%, at 27 7/8; Unilever NV finished up 1 1/16, or 2.1%, at 51 1/4.)