Unilever Is in Talks to Acquire Jessica Alba's Honest Co. -- Update
September 15 2016 - 8:21PM
Dow Jones News
By Serena Ng and Sharon Terlep
Unilever PLC is in talks to acquire Honest Co., the
consumer-products retailer co-founded by actress Jessica Alba,
according to people familiar with the matter.
Unilever, maker of Dove soaps and Axe body sprays, is discussing
a deal valued at over $1 billion but significantly less than the
$1.7 billion valuation that was placed on Honest in a fundraising
round last year, the people said. The talks are at an early stage,
and Honest hasn't ruled out going for an initial public offering
instead, one of the people said.
Honest has raised more than $200 million from outside investors
since the Santa Monica, Calif., company's founding in 2011,
according to FactSet data. Those investors include venture-capital
firms General Catalyst Partners and Lightspeed Venture Partners as
well as money managers Fidelity Management & Research Co. and
Wellington Management Co. In the event of a sale, Honest has
pledged to pay some investors double their investment.
The company generates roughly $300 million in annual revenue,
one of the people familiar said. It sells disposable baby diapers,
household cleaners, personal-care and beauty products and has built
a loyal following among young mothers. Many consumers buy directly
from its website via monthly subscription services. Some items are
also sold at brick-and-mortar retailers including Target Corp. and
Whole Foods Markets Inc.
Acquiring Honest would give Unilever a foothold in the
fast-growing market for "natural" or "green" cleaning products, as
well as the diaper business. Honest's business model could give
Unilever more insight into shopper behavior, but risks alienating
traditional retailers that carry its goods.
Unilever sells packaged food, household and personal-care
products globally, but in the U.S. it doesn't compete with Honest
in many product categories. It sold its North American laundry
detergent business for $1.45 billion to a private-equity firm in
2008, and in recent years has expanded in U.S. hair- and skin-care
products
Honest has challenged giants such as Procter & Gamble Co.
and Clorox Co. with promises to avoid harsh chemicals found in many
mainstream products. However, a Wall Street Journal investigation
earlier this year found Honest's laundry detergent contained sodium
lauryl sulfate, or SLS, one of the ingredients it pledged to avoid.
Honest disputed the findings of two independent lab tests and said
its own testing didn't find SLS.
For Unilever, an acquisition of Honest would be its second
recent purchase of a California e-commerce consumer products
company. In August, it paid $1 billion to acquire Dollar Shave
Club, a premium to the $615 million valuation that company fetched
a year earlier. The fast-growing but unprofitable startup provides
a mail-order service that ships disposable razors for a flat
monthly fee.
There have been a string of high-profile startups, including
Jet.com and Dollar Shave Club, that have recently decided to sell
to established corporations as the IPO market cooled and investors
insisted that startups operate in the black.
Write to Serena Ng at serena.ng@wsj.com and Sharon Terlep at
sharon.terlep@wsj.com
(END) Dow Jones Newswires
September 15, 2016 20:06 ET (00:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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