Colgate-Palmolive Co. (CL) Wednesday agreed to buy the Sanex personal care brand from Unilever PLC (UL, ULVR.LN) for EUR672 million ($940 million), strengthening its personal-care business in Europe.

As part of the deal, the world's largest toothpaste maker by sales and market share also agreed to sell Unilever its laundry detergent business in Colombia for $215 million. Latin America is Colgate's biggest market by sales.

Colgate said the move is in line with its focus on its higher-margin oral care, personal care and pet nutrition businesses. The company is wrestling with a recent spike in commodity costs worldwide that is putting pressure on a number of industries.

Consumer-product companies, facing weak demand in the U.S. and other developed markets, are being put in the tough position of raising prices to offset costs.

Unilever, meanwhile, was required to dispose of the deodorant and bathcare products business in order to get European Commission clearance of its EUR1.28 billion purchase of Sara Lee Corp.'s (SLE) personal care unit.

Sanex's personal care products, such as shower gels and deodorants, accounted for about 20% of the U.S.-based group's sales. Sanex had net sales of EUR187 million in 2010, primarily in Western Europe.

Colgate said it expects the two deals to increase its earnings by about 4% this year, due to a one-time gain on the detergent business. It sees the transactions boosting its profit about 1% in 2012 on growth and efficiencies from Sanex.

"We are pleased to be divesting Sanex in what we consider to be a very attractive deal for Unilever," Michael Polk, Unilever's president of categories said in a statement.

Polk said the simultaneous purchase of Colgate's laundry brands in Colombia, which include Fab, Lavomatic and Vel, will "significantly enhance our position in one of the larger detergents markets in Latin America, bringing critical mass to our Colombian business."

Both transactions are subject to regulatory approval.

Last month, Unilever posted a jump in profits driven by sales and volume gains in emerging markets, but also warned that mature economies remain sluggish and escalating commodity prices are putting pressure on margins.

The Anglo-Dutch maker of Ben & Jerry's ice cream, Knorr soup and Bertolli olive oil spreads and household products such as Dove, Lynx and Cif is stepping up its investment in the face of intensified competition to build its brands in developing economies, where it records over 50% of its revenues, such as Asia, Africa, Latin America and the Middle East.

Still, the company--which sells goods in 170 countries and competes with U.S.-based market leader Procter & Gamble Co. (PG) and Switzerland's Nestle SA (NESN.VX)--is facing rising commodity costs and a challenging consumer outlook in its developed markets, where discretionary income is under pressure from austerity measures such as tax hikes and public spending cuts as governments rein in borrowing.

The group targets profitable volume growth ahead of its markets, steady and sustainable underlying operating margin improvement and strong cash flow.

At 1130 GMT, Unilever shares were up 14 pence, or 0.8%, at 1824 pence, in a higher London market. Colgate shares closed Tuesday at $78.43 and were inactive premarket.

By Matt Jarzemsky and Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; simon.zekaria@dowjones.com
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