Unilever Keeps Bottled Tea Out of Its $44.8bn Foods Merger
Unilever confirmed Lipton Ice Tea stays outside its McCormick foods deal because ready-to-drink is "very different" from packaged food, even as the separate, CVC-owned Lipton hot-tea business takes its second cash rescue in two years.
Unilever has confirmed that its bottled tea business will stay outside the $44.8 billion merger of its foods division with McCormick & Company, telling FoodNavigator on August 20 that ready-to-drink beverages are "very different from the other products in Unilever's Foods portfolio, which is why the business is not included in the transaction."
The exclusion covers Lipton Ice Tea, which Unilever runs through Pepsi Lipton, a joint venture co-owned with PepsiCo alongside Pure Leaf and Brisk. The venture is structured as an independent company with its own board across five regional divisions: North America, Europe and Sub-Saharan Africa, Latin America, Africa, the Middle East and Asia, and Greater China.
On March 31, Unilever agreed to combine its foods business, including Knorr and Hellmann's but excluding its India operations, with McCormick in a deal valuing the food unit at $44.8 billion. McCormick is paying $15.7 billion in cash and issuing $29.1 billion in stock. Unilever and its shareholders will hold 65% of the combined company, which will be valued at roughly $65.8 billion and carry about $20 billion in projected annual revenue. The companies are targeting $600 million in run-rate cost synergies from procurement, manufacturing and overhead. Closing is not expected until mid-2027, pending shareholder and regulatory approval.
Months before that confirmation, Lipton Teas and Infusions was raising cash. The separate company, which holds PG Tips, Pukka Herbs and Tazo, has no relation to the Pepsi Lipton venture beyond the shared brand name; Unilever sold it in a 2022 leveraged buyout led by CVC Capital Partners. It received an additional 210 million euros (about US$246 million) from its CVC-led shareholders, Bloomberg reported on April 29. The injection, a mix of new equity and shareholder loans, was made to support a turnaround and avoid a debt restructuring. It followed a 40 million euro (about US$47 million) injection the previous year.
About 160 million euros (about US$187 million) of the new money takes the form of secured debt issued against Lipton Teas' intellectual property outside the United States, a structure private equity sponsors use both to fund a portfolio company and to improve their own standing against existing lenders should a restructuring follow. Grant Reid, formerly president and chief executive of Mars, has been appointed chair; Marc Busain has joined as chief executive. Between the shareholder loans, the IP-secured debt and the term loans, revolving facility and second-lien loan already on its books, Lipton Teas and Infusions now carries more than 3 billion euros (about US$3.5 billion) of debt, four years after leaving Unilever's hands.
Sources: FoodNavigator, Lipton Ice Tea to remain co-owned by Unilever; CNBC, McCormick buys Unilever's food business in deal that values it at nearly $45 billion; Bloomberg, CVC-Led Shareholders Plug 210 Million Euros Extra Cash Into Lipton Teas; Private Equity Wire, CVC injects €210m into Lipton.