CVC explores sale of troubled Kenyan tea plantation

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Private equity firm CVC is exploring the sale of a Kenyan tea plantation it bought from Unilever last year, where female staff have been sexually harassed and demonstrators have set fire to machines that replace workers.

The group has discussed selling the site in Kericho in western Kenya, according to three people with knowledge of the details. A BBC documentary earlier this year, which was filmed in the final months of Unilever’s ownership, exposed abuse and exploitation at the plantation.

CVC bought the site in Kenya’s tea-growing heartland as part of its €4.5bn acquisition of Unilever’s tea business in July 2022. CVC renamed it Lipton Teas and Infusions.

The deal was seen as a testing ground for how private equity firms balance their focus on maximising profits against growing demands from their investors to make environmental, social and governance improvements at companies they buy, such as by providing better conditions for workers.

The Kericho plantation had a history of violence and sexual abuse allegations before CVC bought it, and the firm said at the time of the deal that “there is a real opportunity here to act as a responsible ESG focused investor”. 

In February this year, the BBC broadcast an investigation revealing that some managers at the site put pressure on an undercover reporter working at the plantation to have sex with them. The filming for the Panorama and Africa Eye investigation took place between April 1 and July 1 last year, concluding just as the CVC deal was completed, the broadcaster told the FT.

CVC said in December 2021, shortly after agreeing the deal, that it had “carried out extensive ESG due diligence” on the site, including sending a team of ESG specialists from consultancy firm EY to Kericho.

“EY’s report confirmed that community welfare is at the heart” of the company, CVC said at the time. EY declined to comment on its due diligence work, citing client confidentiality.

The plantation has also been at the centre of “anti-machines” demonstrations this year, with leaf-plucking machines that can replace workers set on fire by people in the community who have lost their jobs as a result, said Dickson Sang, secretary of the Kenya Plantation and Agricultural Workers’ Union in Kericho County.

A Lipton spokesman said the plantation employs the same number of people as when CVC bought the business, and that it is working with authorities “to create social and occupational programmes to enhance [the] working lives of our employees and the communities”.

He added that the business had been unaware of the sexual harassment cases until February when the BBC raised them, and was “thankful” to the broadcaster for doing so.

“We immediately launched a thorough independent investigation and offered comprehensive support to any affected women on our estates,” he said, adding that the company was putting in place an “action plan” and had fired some individuals and barred some from its facilities. It has set up an oversight committee to monitor operations.

Asked about the potential sale of the plantation, he said Lipton had “received a number of unsolicited inbound expressions of interest in our estates” and would “review this strategic question at the right point in time”.

If CVC sold the plantation, it would keep the rest of the business, which produces and sells tea under brands including PG Tips, Lipton and Pukka and has about €2bn of annual revenues.

Unilever said it was “deeply shocked and saddened” by the behaviour shown in the BBC documentary, adding: “We are determined to understand why the extensive measures we put in place . . . failed to prevent this abuse.”

Kenyan authorities have also launched an investigation. Beatrice Kemei, a Kericho County MP, said that “sexual harassment and sexual favours seem to be the order of the day within Kericho County tea estates”.

Other private equity firms had walked away from buying Unilever’s tea business because of concerns about the plantations.

US firm Advent International excluded the plantations from its offer for the unit, which was more than €750mn below CVC’s winning bid, according to two people with knowledge of the deal. Carlyle dropped out just days before the bid deadline, partly because of worries about Kericho.