Welcome to The Silent Shopper, the newsletter for retail operators, retail investors, and of course, shoppers. Thank you for joining me for Edition 4.
Context
In the past few months, there has been a flurry of consumer companies announcing plans to or executing a divestiture (sale) of one of their brands. This is known as a carve out. Companies are typically carved out and become their own, independent entity when the ParentCo believes they would be valued more highly without them (“we want to focus on our core business”). They also provide immediate capital, ease regulatory pressure, and allow the ParentCo to still be invested in a brand without owning it outright.
Some of these recent transactions include the following, which I will separate by executed and announced.
Executed:
Starbucks sold Starbucks China to Boyu Capital (PE firm) in November for $5B
Unilever spun off The Magnum Ice Cream company. It was expected to IPO in November prior to the government shutdown
Jack in the Box sold Del Taco to Yadav Enterprises (a major franchisee operator) in October for $155M. It was bought for $585M in March 2022
Unilever divested Kate Somerville to Rare Beauty in October
Polaris spun off Indian to Carolwood (PE firm) in October
Reckitt divested Essential Home (Air Wick, Woolite) to Advent (PE firm) in July. Reckitt acquired Air Wick for $200M in December 1984 and sold the unit for $4.8B
Announced:
Yum! announced a strategic review of Pizza Hut in November
Coca-Cola announced they are looking to sell Costa Coffee in November
Kenvue considered selling some Health/Beauty brands (Neutrogena, Aveeno, Clean&Clear) before Kimberly Clark acquisition in November
Coty was looking for a buyer for its Mass Prestige segment (Covergirl, Rimmel, Sally Hansen) in October
Estee Lauder was looking for buyers for Too Faced in October
Kraft-Heinz announced their demerger in September. Global Taste Elevation Co and North American Grocery Co are expected to publicly trade in 2H26
Analysis
In today’s edition, I was interested in exploring previous consumer carveouts and the method of how they were carved out. The major methods a company can use to carve out another company include IPO (can be for a slice of the equity or a full spinoff), Strategic Sale (sale to a competitor), Sponsor Sale (sale to a financial institution, typically a PE firm), or Section 363 Sale (sale out of bankruptcy). See below for my analysis:
There are a few takeaways I noticed:
The ParentCo wanting to “focus on its core business” is a justification for almost every carveout. ParentCo-brand misalignment (or a fruitless/poorly integrated acquisition) is the carveout trigger in many cases
Most of these are via IPO. I intentionally selected successful carveouts, so there is bias in that iconic brands that can standalone from the ParentCo have historically been divested via IPO. Many of these (less Victoria’s Secret, Dave & Buster’s) are more successful on their own. I am excited to watch the 7/11 US IPO in 2H26
Activist investors have a hand in many carveouts, and their involvement is typically underreported. I personally did not know about Bill Ackman’s campaign for Tim Horton’s. Barington Capital has been involved in Victoria’s Secret since before its terminated sale to Sycamore and owns ~1% of Victoria’s Secret today (were vocal in June/July of this year)
Here is an abbreviated version of Bill Ackman’s letter mentioned above for Tim Horton’s / Wendy’s. The full PDF is linked here and is certainly worth a read.
I was not able to find anything specific to Victoria’s Secret, but I did find this Barington link for Macy’s that has their investment presentation attached from 2024. A preview below to see how they are likely thinking about VS:
Close
My placemat above intentionally showcases successful carveouts, but there have been several lackluster carveouts more recently. The following come to mind:
Kenvue (from J&J): Stock down 40% from IPO → Purchased by Kimberly Clark in November for $40B
MasterBrand (from Fortune Brands): Stock flat from IPO → $4B Merger between MasterBrand and American Woodmark announced in August
Tropicana (from PepsiCo): Joint venture between PAI Partners (69%) and PepsiCo (39%). Appointed new CEO in November, Paul Chibe (Pabst/Ferrero/Anheuser-Busch InBev). PAI gave the company a $30M emergency loan, and PepsiCo wrote down this investment by $135M
I will be keeping tabs on The Magnum Ice Cream Co., Kraft-Heinz, Pizza Hut, and 7/11 in the coming months.
Thank you for reading, and I hope you will join me next time. Please respond with any thoughts / feedback.
Best Wishes,
TSS