2nd UPDATE: Colgate To Buy Unilever's Sanex Personal Care Brand

Colgate-Palmolive Co. (CL) on 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 to Unilever its Colombian laundry-detergent business for $215 million. Latin America is Colgate's biggest market by sales.

The move is in line with Colgate's focus on its higher-margin oral-care, personal-care and pet-nutrition businesses. The company has been shedding less-profitable household products, particularly detergent, over the past few years.

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

Sanex's personal-care products, which include deodorants, bath gels and hand wash sold under the Sanex brand, accounted for about 20% of Sara Lee'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 sale. It sees the transactions boosting its profit by about 1% in 2012 on growth and efficiencies from Sanex.

U.S. analysts are enthusiastic about the deal, saying Colgate should be able to cut costs from the combined business, and Standard & Poor's equity research raised its rating on Colgate to hold from sell.

Still, Jefferies analysts wrote in a client note that Colgate is paying "a fairly full price" for Sanex, likely "emblematic of an environment with several well-heeled players chasing comparatively few assets in play."

Unilever President of Categories Michael Polk said the 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.

The deal comes as both Colgate and Unilever wrestle with a dramatic spike in commodity costs worldwide, as well as a challenging consumer outlook in developed markets facing harsh austerity measures.

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 pressuring margins.

The Anglo-Dutch maker of Ben & Jerry's ice cream 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 in developing economies. Unilever derives more than 50% of its revenue in emerging markets in Asia, Africa, Latin America and the Middle East.

Unilever shares gained 0.5% to 1819 pence on the London exchange, and its American Depositary shares were up 0.5% to $30.40. Colgate shares were off 0.6% to $77.98.

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

-Matt Jarzemsky contributed to this article.

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