Unilever to Buy US Household Stock Seventh Generation

The acquisition makes strategic sense for Unilever, say equity analysts. Seventh Generation's products appeal to the environmentally conscious consumer

Philip Gorham 20 September, 2016 | 3:06PM

Unilever (ULVR) is to acquire Seventh Generation, a North American household and personal care product manufacturer, for an undisclosed amount. With the target's sales likely to be around $250 million this year, we believe Unilever could have paid close to $1 billion.

For Unilever, we reiterate our wide moat and stable trend ratings, and £32.50 fair value estimate. The acquisition makes strategic sense for Unilever. Seventh Generation's household and personal care products contain fewer chemicals and use recycled packaging, which appeals to the environmentally conscious consumer.

Although it is still a fairly niche category at around 5% of the household detergent category, natural cleaning products are growing at a low-double-digit rate and offer one of the few premiumisation opportunities in a category that we believe will be susceptible to trading down in the long term. Store brand competition tends to be higher and pricing power weaker for products that are perceived to offer little consumption utility and are not consumed in social settings.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Unilever PLC4,318.00 GBX-2.33

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Philip Gorham  

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