Unilever’s £6bn Flora auction thinly spread as CVC drops out

The former owner of Formula One motor racing has achieved an unusual feat in the frenetic world of City deal-making: being eliminated from a single auction for the second time.

Sky News has learnt that CVC Capital Partners is no longer in the running to acquire the spreads division of Unilever (NYSE: UL - news) , leaving a two-horse race to clinch a £6bn deal before Christmas.

Sources said that Apollo Global and KKR were now the principal remaining bidders vying to acquire I Can't Believe It's Not Butter, Flora and other international brands.

Reuters reported on Friday that KKR was poised to win the auction after entering exclusive talks with Unilever.

CVC (Taiwan OTC: 4744.TWO - news) originally teamed up with Blackstone (NYSE: BX - news) , another buyout firm, to bid for the unit, but saw their joint offer rejected in October.

It then made a revised solo offer but that too has been eliminated, according to banking sources.

Platinum Equity is interested in the developed markets operations of the spreads division, but it was unclear on Friday whether it remained in the auction.

Sources said that Apollo and KKR were expected to learn whether either of their bids had been successful before Christmas, with Unilever also leaving open the prospect of a separate stock market listing for its spreads business if it fails to secure a sufficiently attractive offer.

The auction is an important component of Unilever's efforts to improve returns to shareholders, outlined earlier this year.

Unilever decided to conduct an auction of the under-performing spreads operations two months after the FTSE-100 company was targeted by an unsolicited £115bn takeover approach from Kraft Heinz (Swiss: KHC.SW - news) , the US-headquartered food giant.

The move from Kraft Heinz sparked a hostile reaction from the Unilever board and rang alarm bells in Downing Street, where Theresa May had vowed to restrict unwanted foreign takeovers.

Paul Polman, Unilever's chief executive, has turned to faster-growing categories for takeover opportunities, snapping up the online-based Dollar Shave Club for $1bn last year and Mae Terra, a Brazilian organic food company, among other acquisitions this year.

Sky News revealed last month that Unilever's board had begun a formal succession planning process ahead of Mr Polman's anticipated retirement in about 18 months' time.

The spreads category has been in long-term decline as increasingly health-conscious consumers have turned to butter-based products.

CVC, which had been working on its bid with Sean Gogarty, a former boss of the Unilever spreads division, could not be reached for comment on Friday.