Unilever's Mae Terra Buyout to Expand Organic Food Business

Consumer products giant Unilever Plc UL has been focused on shaping its portfolio to achieve sustainable growth. To offer organic and healthy food products to consumers, Unilever recently agreed to acquire Brazilian natural and organic food business Mãe Terra. The terms of the transaction remain undisclosed and is subject to customary regulatory approvals.

Benefits of the Acquisition

Founded in 1979, Mãe Terra offers food products under categories like organic cereals, cookies, snacks and culinary products. Per Euromonitor, the main Mãe Terra categories represent a Brazilian market worth more than 8 billion euros.

The deal is a strategic fit for this European consumer products giant as the company is looking to expand in the high-growth naturals and organic segment. The company already distributes more than 120 products in Brazil and this buyout is expected to augment the company’s presence further in Brazil. Mãe Terra is also expected to get scale with Unilever’s expertise and distribution channels.

Unilever PLC Price, Consensus and EPS Surprise

 

Unilever PLC Price, Consensus and EPS Surprise | Unilever PLC Quote

Unilever Strengthening Portfolio

Notably, the Anglo-Dutch buyer has been on an acquisition spree over the last few quarters. In fact, this is the third acquisition in a month. Last week, Unilever agreed to acquire a Seoul-based cosmetic company Carver Korea, maker of toners and moisturizers, for $2.7 billion. In September, it bought Pukka Herbs for an undisclosed amount.

We note that Unilever has been trying all means to strengthen and enhance efficiency after the failed $143 billion takeover attempt by Kraft Heinz Co. KHC in February 2017. Since then, the company has undertaken a comprehensive review to return more cash to shareholders through buybacks and dividends as well as raise its margin target in order to boost its performance. In April, Unilever has reportedly decided to sell its shrinking spreads business, including brands like Flora and Stork butter. Furthermore, the company announced plans to raise cost-savings target as well as combine foods and refreshments businesses.

Stock Price Movement

The company has been trending higher on the back of its recent strategic business reviews, aiming to deliver profits and boost shareholders value amid sluggish growth and increasing competition in the global packaged goods industry.

A glimpse of Unilever’s stock performance shows that its shares have been rallying since the company rejected Kraft Heinz deal. Since Feb 17, the company’s shares have rallied 36.1%, outperforming the industry’s gain of 11.6% and the broader Consumer Staples sector’s growth of 4.1%.

 

Unilever currently carries a Zacks Rank #2 (Buy).

Looking for More? Check These Consumer Staples Stocks

Investors may also consider other top-ranked stocks such as Estee Lauder Companies, Inc EL, sporting a Zacks Rank #1 (Strong Buy) and Nu Skin Enterprises, Inc. NUS flaunting a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here.

Estee Lauder delivered an average positive earnings surprise of 13.7% in the trailing four quarters. It has a long-term earnings growth rate of 12.2%.

Nu Skin delivered an average positive earnings surprise of 10.8% in the trailing four quarters. It has a long-term earnings growth rate of 8.7%.

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