Unilever Ice-Cream Unit Priced Too High, Says Analyst

Unilever's (LON: ULVR) plan to sell its ice cream unit in 2025 may face a bumpy road due to a potential price mismatch, according to Jefferies analyst David Hayes.

While Unilever reportedly seeks a hefty EUR 18 billion for the division, Hayes told investors in a note this week that he believes this valuation is inflated.

His assessment comes after Bloomberg reported last week that Unilever has started initial talks with buyout firms regarding a possible sale of its ice cream business, which could be worth as much as £15 billion ($19.4 billion).

Bloomberg, citing sources, said the consumer goods company has begun holding management presentations with potential buyers about the business. The publication states that private equity firms Advent International, Blackstone Inc., Cinven, and CVC Capital Partners Plc have expressed preliminary interest.

However, Jefferies analysts argue that Unilever's asking price relies on “out-of-date benchmarks” from 2019 ice cream divestments. Hayes suggests a more realistic figure of EUR 13.5 billion before taxes.

He highlights two key factors undermining Unilever's valuation. Firstly, the “rich multiples” in 2019 do not resemble the “very different discount environment.”

Secondly, the analyst raises concerns about changing consumer preferences toward healthier options, which could be impacted by rising weight-loss drug usage.

Jefferies maintained its Underperform rating on Unilever stock, with a 4,000p price target. The analyst's caution suggests potential headwinds for Unilever as it seeks a buyer for its ice cream unit.

Elsewhere on Monday, analysts at TD Cowen initiated coverage of Unilever with a Buy rating and a $67 price target.

The bank said Unilever has an “advantaged portfolio” with a strong emerging markets platform, along with a “talented new CEO.” They believe the company is in the early stages of executing a performance-based cultural turnaround, noting its improved focus on product superiority across its 30 “Power Brands.”