Unilever Indonesia's Ice Cream Transfer Confirms Global Separation To Be Centralised, Says Citi

Unilever Indonesia's latest transfer agreement of its ice cream business to PT The Magnum Ice Cream Indonesia as a part of its global ice cream divestment plan shows that the move will be centralised, according to Citi Research.

As speculated by some investors, the global ice cream divestment will not be sold separately in each country, it said in a report on Nov. 26.

Unilever on Monday said that it has signed a business transfer agreement with PT The Magnum Ice Cream Indonesia—a related party entity—which will eventually be divested by the parent company. The transaction is valued at IDR 7 trillion which includes fixed assets with market value, net book value and inventory value.

The sale of the ice cream business is undertaken in view of the Unilever Group's plan to separate its global ice cream business, it said in a statement.

This will enable the company to realise the value of its investment in the Indonesian ice cream business and re-focus on its remaining core businesses to enhance value to shareholders in the long-term, it said.

According to Citi, ice cream contributes around 9% of the company sales in Indonesia and expects its return on investment to be weaker than other segments given its heavy investment in cold chain facilities. "We see the ice cream segment in Indonesia to be significantly more competitive in recent years; this provides a lucrative exit for Unilever."

The brokerage maintained its 'Sell' call on the stock with a target price of Rs 1,600 per share, a downside of 16.4% from the previous close.

In a similar move, its Indian company Hindustan Unilever Ltd. received approval to spin off the company’s ice cream business into an independent, publicly listed entity — a move aimed at maximising value for shareholders and enhancing operational focus.

The decision to separate the ice cream business by the group was taken earlier this year. The company was confident that the future growth potential of ice cream will be better delivered under a different ownership structure, it said during the announcement of the plan.

A demerger is the most likely separation route, and the company is expected to operate with a capital structure in line with comparable listed companies, it said. Full separation is expected by the end of 2025.