UNILEVER’S patience with the Birds Eye frozen foods business ran out as the Anglo-Dutch consumer goods giant kicked off a likely sale of the underperforming unit yesterday.

Unilever said that it would embark on a “study into strategic options” for the business, which should conclude early next year, but stopped short of confirming an imminent sale.

Analysts, however, said a sale would be the most likely outcome of the review, with some predicting the frozen foods unit could fetch more than £1 billion. Bidding is likely to be dominated by private equity firms that would relish the cashflow-rich nature of the frozen foods unit, which last year had sales of €2 billion (£1.3 billion).

Unilever becomes the latest multinational to signal a sale of part of its European business to concentrate on more profitable growth elsewhere. Cadbury Schweppes, the drinks and confectionery maker, this week sent out information memorandums to parties interested in its European beverages division, which makes Schweppes, Orangina and Oasis drinks. First-round bids are expected by the middle of next month — with bidders likely to include Lion Capital, Permira, Carlyle Group and PAI, the French private equity firm.

HJ Heinz, the US ketchup group, is conducting a strategic review of its European food business amid expectations that it will sell non-core operations such as John West tuna and Linda McCartney vegetarian ready meals. Sara Lee, the US consumer goods giant, wants to sell its Meats Europe division, producer of Aoste and Imperial packaged meat goods, which last year had sales of $1.1 billion (£610 million).

Unilever has long been unhappy with its frozen foods unit. Niall FitzGerald, former chairman, placed the division on notice two years ago but the modest improvement since has not satisfied Patrick Cescau, his successor.

Unilever lumps the unit with its ice-cream division, which last year reported a 5 per cent drop in sales to €6.5 billion and a 32 per cent slump in operating profit to €680 million. Operating profit margins fell from 14.6 per cent to 10.5 per cent, with Unilever blaming a drop in sales, higher input costs and competition.

A Unilever spokesman said that a sale of the unit was only one option that would be considered, along with a partial sale, acquisitions to add critical mass or a major rebranding.

One City analyst, who asked not to be named, said that the unit would be attractive to private equity firms, who could borrow heavily against the division’s strong cashflow. Private equity bidders could be expected to pay a multiple of about one time’s sales.

CHILL FACTOR

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