The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Aimee Donnellan

DUBLIN, May 18 (Reuters Breakingviews) - Any private-equity groups eyeing a super-sized return from Magnum Ice Cream MICCT.AS may have to settle instead for a bite-sized scoop. Reuters reported on Friday, citing two sources, that CD&R and Blackstone BX.N were at the early stages of exploring a bid for the $10 billion maker of Ben & Jerry’s. The typical buyout playbook of cranking up sales and margins will be difficult for this Unilever ULVR.L spin-out, given the changing consumer tastes and the need for investment. More significantly, the valuation multiple could drip ever-lower.

Unilever has a habit of getting out of businesses at just the right time. In 2017, it sold its spreads business to KKR KKR.N. The buyout giant has struggled to turn it into a vegan-friendly juggernaut amid an ultra-processed-food backlash. Growth has been sluggish. CVC Capital CVC.AS, meanwhile, has had a difficult time with the Lipton Teas and Infusions business it bought for 4.5 billion euros in 2021. Last month, a person familiar with the matter told Breakingviews that the company’s bosses held a call with bondholders and revealed that both sales and EBITDA shrank in 2025.

Magnum has many of the same traits. Cream and sugar are proving to be less than appetising to an expanding army of GLP-1 weight loss medication users, which now includes around one in eight Americans. Any future new owners may hope that they can boost sales in emerging markets like India. But that will require heavy investment in marketing, freezers and other supply-chain necessities.

The returns to a leveraged buyout seem low. Assume a 40% offer premium, and the purchase price including debt would be 14.1 billion euros, or 10.8 times consensus 2026 EBITDA. Using net debt equivalent to 6 times EBITDA would imply a 6.3-billion-euro buyout equity check.

Generously imagine that the new owners boost the top line at 5% a year, which is faster than analysts' 3% average forecast. Perhaps the buyout barons manage to strike gold in India - or with high-protein, waistline-friendly ice-cream snacks in the U.S. Finally, assume that they manage to do all this while keeping EBITDA margins steady. On that basis, EBITDA would be 1.7 billion euros after five years and net debt might have shrunk to 6.2 billion euros.

On the same 10.8 times valuation multiple, the business would be worth 18.1 billion euros, implying 11.9 billion euros of equity value for the buyout barons. They would have not quite doubled their money, for a 14% internal rate of return - well below the 20% level private equity groups like to target.

It could be worse. Companies with slow growth risk a sliding valuation multiple. Holding all else constant, the buyout barons' internal rate of return would slip into the single digits if the Magnum exit multiple dips much below 10 times EBITDA.

Unilever cast-offs have a patchy track record. Perhaps its global reach gives bosses greater insight into changing consumer tastes. That raises a question for private equity: if Unilever is willing to sell, why should you be willing to buy? Failing to ponder this, and piling into Magnum, would be like holding a melting cone.

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CONTEXT NEWS

Blackstone and CD&R are among private equity firms in the early stages of exploring bids for Magnum Ice Cream Company, according to a May 15 Reuters report, which cited two sources familiar with the matter.

The firms are monitoring Magnum's share price before deciding whether to make a move, the report said.

British consumer goods giant Unilever, which took nearly two years to list its ice cream brands, retains a 19.9% stake in Magnum and plans to exit within five years.

Deliberations are at an early stage, and both firms are waiting for Magnum to report summer sales before making a decision, the Reuters report said, citing one of the sources. Magnum makes a large share of its revenue during that period. Other private equity firms are also interested, the report added.

Magnum, Unilever, Blackstone and CD&R declined to comment, according to the Reuters report.

Shares in Amsterdam-listed Magnum were trading at 13.79 euros as of 1036 GMT on May 18. That was 2.4% below their May 15 closing price but 6% higher than their level on May 14, before the Reuters story came out.