Colgate-Palmolive's (CL) first acquisition since 2006 is a small but smart deal for the firm. By acquiring the Sanex personal-care brand (which includes shower gels and deodorants) from Unilever (ULVR) for $940 million, or roughly 3.6 times fiscal 2010 sales, Colgate expands its presence in Western Europe at a time when competition has become particularly heated. Unilever was forced to sell the business for antitrust reasons after it acquired Sara Lee's personal-care business in 2009, but it appears that it is getting a solid price for this attractive brand. Moreover, the sale should also enable Unilever to finally close the transaction with Sara Lee, which was announced about a year and a half ago.
In addition to the Sanex sale, Unilever announced that it is buying Colgate's Colombian laundry detergent business, which includes the Fab, Lavomatic, and Vel brands, for $215 million. This deal fits with Colgate's desire to exit the category and is in line with Unilever's recent strategic efforts to build out its higher-margin household business in faster-growing emerging markets. We don't intend to change our fair value estimates for either firm on the basis of these announcements, given the relatively small size of the transactions, but we think Unilever remains fairly valued and Colgate modestly undervalued at current market prices.