Zacks_Analysts' Blog : Unilever Eyeing OAO Concern Kalina - Analyst Blog

Unilever Plc.(UL) has decided to take over Russian skincare company OAO Concern Kalina for about $850 million. The deal is expected to be announced on Friday.

Kalina was initially a state-owned Soviet cosmetics and perfume business. The company changed its name to Kalina seven years after it was privatized in 1992. The company is a leading player in the Russian market, occupying 30.4% of the country's face-cream market and 35.6% of its hand and body lotion market. It is also a leader in Russia's mouthwash market, with a 45.6% market share, according to a report.

The acquisition is expected to boost Unilever's efforts to expand its personal-care unit. Unilever markets major global skincare brands such as Dove, Pond's and St. Ives. The deal will also add Kalina's popular brands like Pure Line and Black Pearl face and body creams, and Forest Balsam toothpastes and mouthwashes into Unilever’s already rich portfolio.

Moreover, the deal gives the company a stronger base in one of the world's most promising skin-care and cosmetics markets. Russian women have been keen buyers of skin-care and makeup products. The buying power accelerated over the last decade, as Russian consumers spent more money on discretionary products like face creams, However, the Russian consumers had recoiled during the financial crisis.

Unilever had targeted Russian companies for years. In 2008, Unilever bought Russian ice cream company Inmarko for an undisclosed amount. Again, in 2009 it acquired Baltimor Holding ZAO's sauces business, the leading ketchup business in Russia.

Several retail giants have been keen on tapping the growing Russian market. Spirits company Diageo Plc. (DEO) bought Turkey's Mey Icki for $2.1 billion earlier this year. Again, Pepsico Inc. (PEP) recently announced the completion of the acquisition of Russia's leading branded food and beverage company Wimm-Bill-Dann Foods OJSC.

Headquartered in London, Unilever manufactures and sells consumer products in more than 100 countries under brands such as Hellmann’s, Lipton, Surf, Dove, Suave and Vaseline.  Unilever had sales of $62 billion in 2010. However, the presence of Procter & Gamble Co. (PG), a strong competitor, concerns us.