LONDON Consumer goods giant Unilever Plc/NV is set to put its Italian frozen foods unit up for sale next week with private equity groups Permira and Lion Capital likely to lead the 600 million euro-plus ($839 million-plus) auction, sources close to the situation said on Monday.
Permira [PERM.UL, which owns Birds Eye Iglo, and Lion Capital which runs Findus Group are expected to lead bidding for the Unilever business, which analysts have priced at 600-700 million euros.
"We expect the information memorandum to go out next week and kick-off the auction process," said one source with knowledge of the situation.
BC Partners, which owns French frozen food distributor Picard, intends to participate in the process, a separate source familiar with the matter said.
Also eyeing the business is French private equity house PAI Partners, which counts United Biscuits and Yoplait among its current portfolio companies, the source added.
Europe's frozen food industry has struggled to achieve sales growth as consumers opt for fresh and chilled products, and its response has been to consolidate to cut costs while looking to new products and promotions to try and kick start growth.
Unilever lost patience with trying to find growth from its frozen food European business selling Birds Eye Iglo to Permira in 2006 for a mouth-watering 1.7 billion euros, but kept its Italian business due to its close links to its ice-cream unit.
Permira fought off interest at the time from another private equity group CapVest, which owned the Findus Group, but after losing out CapVest went on to sell Findus for 1.1 million pounds ($1.77 million) to Lion Capital in 2008.
Unilever's business up for sale is called Findus Italy, but has no link to the Findus Group which was originally owned by the world's biggest food group Nestle before moving into private equity hands. It markets frozen ready-meal dishes as well as fish and vegetables products.
Analysts at brokers Jefferies International estimate Findus Italy makes annual earnings before interest, tax, depreciation and amortization of 65-75 million euros and could fetch a price tag of around 600-700 million euros.
The disposal will cut Unilever's dependence on slower growing and commoditized food businesses in Europe, and together with its purchase of Sara Lee's personal care operations, with brands like Radox and Sanex, in September will help boost overall growth in its sluggish European business.
Chief Executive Paul Polman took over at Unilever at the start of 2009 and has put the focus clearly on reviving sales volume growth rather than cost cutting and relying on price rises to drive growth.
Some believe Polman's predecessor at Unilever Patrick Cescau should have sold the Italian unit back in 2006 with the rest of the European frozen foods business.
"Unilever should have sold it then, they would have achieved a better multiple for it. The link with the ice-cream business was overstated," said another source.
Unilever and the private equity groups all declined to comment.
Unilever Plc shares were off 0.4 percent at 19.20 pounds by 1445 GMT broadly in line with a lower UK stock market.
(Additional reporting by Victoria Howley)
(Reporting by David Jones and Simon Meads; Editing by Kate Holton)