UN Unilever NV

Anglo-Dutch consumer goods giant Unilever PLC (UN, UL) said Monday it is selling its Italian frozen food business to Permira's Birds Eye Iglo for EUR805 million, ending a hotly-fought auction between rival buyout firms.

The deal comprises a factory in Cisterna, Italy, which produces the brands 4 Salti in Padella, Sofficini, Capitan Findus and That's Amore. A total of 650 factory and head office staff will transfer as part of the deal.

"With this deal, Unilever is now in a stronger position to focus on its core categories outside frozen foods and to achieve long-term growth in the Italian market," said James Hill, Chairman of Unilever Italy.

The business generated sales of EUR462 million in 2009.

The unit was put on the block in April and Goldman Sachs (GS) hired to run the sales process, which attracted a raft of private equity firms in its initial stages.

Permira and rival Lion Capital were expected to be frontrunners early on because each has a complementary business--Lion Capital owns Findus Group and Permira has the rest of Bird's Eye, having bought it from Unilever four years ago for EUR1.7 billion. The Italian operations were the only part that Unilever held on to at the time.

In the end Permira was able to stump up more money because of greater synergies, one person familiar with the situation said.

"We are excited about the reunion of Findus Italy and Birds Eye Iglo," said Birds Eye Chief Executive Martin Glenn.

"We are committed to building and investing in a sustainable and profitable business for the future and believe that our combined capabilities will allow us to deliver an unrivalled frozen food offer across Europe to our consumers," he added.

The deal is being financed with EUR300 million equity coming jointly from Permira and Birds Eye and the balance with a loan package, illustrating that banks are willing to provide decent-sized chunks of debt for the right businesses.

Since the financial crisis private equity firms have generally had to expect to finance leveraged buyouts with at least 50% of equity which means less profit when the business is sold than if the acquisition is more highly-leveraged.

At 1100 GMT, Unilever shares were up 1.17%, or 22 pence, at 1904 pence in a slightly higher London market. They have risen over 25% in the past year.

-By Michael Carolan and Marietta Cauchi, Dow Jones Newswires; 44-20-7842-9278; michael.carolan@dowjones.com

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