Oct. 17 – The Anglo-Dutch Unilever PLC said Friday that it had agreed to buy 82 percent of the Yekaterinburg-based beauty and cosmetics products manufacturer OJSC Concern Kalina for 500 million euros (US$700 million).
The deal, which has to be approved by regulators, “will strengthen and re-balance Unilever’s portfolio and competitive position in Russia, an emerging market with considerable potential and one of our priority countries,” said Paul Polman, CEO of Unilever.
Kalina is Russia’s largest local personal care player with leading positions in skin and hair care and an expected 2011 turnover of around 303 million euros, Unilever said.
Shares of Kalina’s relatively small free float on the MICEX stock exchange soared 41 percent to 3,098 Russian rubles (US$99), while Unilever’s rose 3.1 percent to €24.795 in Amsterdam as investors warmed to its latest expansion plan.
Unilever and Kalina did not disclose who exactly is selling the 82 percent stake. However, it has been said they will make a tender offer for the remainder of the shares once the deal is approved.
“We don’t disclose the sellers. Maybe later,” said Kalina spokeswoman Maria Shakleina in a company statement.
“Kalina appears an attractive acquisition for Unilever as it would provide the company with dominant market shares in the Russian personal care market,” Richard Withagen, analyst with SNS Securities said to The Associated Press. “It would also be in line with Unilever’s strategy to grow sales in emerging markets.”
Unilever said the acquisition would make it the second-largest player in the country’s market for personal care products after Procter & Gamble.
The combined companies will also have 22 percent market share in hair care products, which will make it the No. 1 player in this segment, followed by L’Oreal, Schwarzkopf and Beiersdorf. The deal will also result in Unilever entering the facial care segment, with a 33 percent share, the company said.
“Kalina is undoubtedly one of the top companies in the cosmetics market. Such an acquisition will allow Unilever to increase its market share significantly,” Finam analyst Maxim Klyagin said to The Moscow Times.
Analysts estimate the current local cosmetics market size at about US$9 billion. It has slightly declined in 2009 as a result of the financial crisis, but has demonstrated stable growth since then.
The Unilever – Kalina deal is only one of the recent acquisitions made by major foreign companies seeking to expand their business in the Russian market in the last couple of years.
In September 2011, Coca Cola acquired the leading local juice-maker Nidan Soki, and two months after, its rival PepsiCo bought a controlling stake in Russia’s biggest juice and dairy producer Wimm-Bill-Dann for US$3.8 billion.
“We see the continuation of a trend of foreign strategic buyers that are already present in Russia expanding their businesses by buying domestic segment leaders with strong local brand portfolios, products and production assets, extensive national distribution networks, transparent accounts and strong management teams,” Renaissance Capital said in a note Friday.
“The trend is likely to continue in the future with alcohol maker Synergy, sea food producer Russian Sea, drug maker Pharmstandard, as well as retailers M.Video, and X5 Retail Group are potentially interesting for foreign companies seeking to enhance local presence,” the note says.
Unilever, which has about 7,000 employees in Russia, has already invested almost 1 billion euros locally, according to the company’s web site.
With 1,900 employees, Russian beauty firm Kalina is headquartered in Yekaterinburg, where it also has a manufacturing facility. Yekaterinburg, the capital of the Ural Federal District and Sverdlovsk Region, is located on the Ural Mountains, separating Central Russia from Siberia and Europe from Asia.
The up-to-date information indicates that Cyprus-based Prego Holdings Ltd. owns a 30.6 percent stake in Kalina, while 18.6 percent is owned by a subsidiary of Kalina itself, and a further 10.8 percent is held by Russia’s VTB Capital. Deutsche Bank Trust Company Americas is reported as owning 9.8 percent, while 7.1 percent is held by Genesis Asset Managers.