Unilever Tea Sale to CVC​

By Jake Rickman​

What do you need to know this week?

Unilever has agreed to sell its tea division to CVC Capital Partners for €4.5bn.

Unilever plc is a large British company that owns lots of different companies and brands in the home healthcare products and food & refreshment industries.

Unilever’s tea division, which sits within its food & refreshment division, includes some of Britain’s most beloved tea companies like PG Tips and Lipton.

CVC is a global private equity firm that buys companies in most sectors around the world. Private equity houses purchase companies with the intention of selling them a few years later for more than what they paid. CVC is no different.

Why is this important for your interviews?

ESG and Human Rights

The CVC-Unilever tea deal raises important environmental, social, and governance (ESG) issues related to alleged human rights abuses on the tea plantations in eastern Africa.

In 2007, seven people were killed on a plantation in Kenya owned by Unilever. 218 Kenyans later filed a suit against Unilever. However, the Court of Appeal in England dismissed the claim against Unilever in 2018.

That CVC has chosen to acquire “ekaterra” — which is the company that owns all of the tea brands being sold to CVC — in light of the sustained controversy surrounding the tea trade is notable: it suggests they are confident that they can navigate ESG concerns. However, future accusations of human rights abuses on the tea plantation may impact CVC’s ability to sell these brands in the future because of investor discontent.

The Private Equity Transaction

The deal is to be structured on a “cash-free, debt-free” basis, which is common in some private equity transactions. Unilever will keep the “cash reserves” in the company, but it will also be responsible for paying off pre-existing debts so that CVC can acquire ekaterra debt-free.

How is this topic relevant to law firms?

Deals as big as this can generate hundreds of thousands of pounds in fees for law firms. Within a single transaction like Unilever’s sale to CVC, Freshfields (acting for CVC) and Linklaters (acting for Unilever) will have to work across numerous practice areas, including:

  • corporate;
  • competition;
  • financing;
  • tax;
  • employment; and
  • intellectual property.
Finally, investors and other key stakeholders are increasing the pressure on companies to act in a socially conscious way. As important advisers to their clients, lawyers must be able to advise them on how to navigate this fraught and important commercial challenge.