Godrej to sell Indonesian foods biz to PE firm

Last Updated: Fri, Jan 25, 2013 20:21 hrs

Godrej Consumer Products Ltd (GCPL) has entered into an agreement with private equity firm Creador to divest its non-core foods business in Indonesia. The business was part of PT Megasari Makmur, the company acquired by GCPL in 2010 as part of its attempts to expand its global footprint.

While GCPL did not give the deal size, analysts estimate it to be in the region of Rs 200-230 crore. Sales of the foods division, which includes cereals, snacks and instant foods, have been pegged at Rs 120 crore.

GCPL will continue to distribute the products for another two years.

HSBC was the advisor to Godrej on the deal, which will closed in the next two months.

Commenting on the divestment, Adi Godrej, chairman, GCPL said, “Our decision to divest the foods business is in line with our strategic intent to focus on home and personal care. The divestiture of this business will improve the margin profile of our Indonesian business and help the team to take the household and personal care platforms to their full potential."

The proceeds from the sale are expected to be used to service GCPL's debt, which is pegged at around Rs 1,800 crore. GCPL is also expected to strengthen its presence in personal care post the transaction. In the last two years, the Indonesian business has grown at over 20 per cent per annum, generating revenues of Rs 1,000 crore. Key brands include Hit, which operates in household insecticides, Stella and Fogo air freshners, Mitu baby products and Wetties tissues.

Godrej has said that his firm will continue to look at acquisitions in Asia, Latin America and Africa as part of its three by three strategy. Indonesia is a key market in Asia, where the company is keen to grow its business, he said. "Along with continued strong organic growth, we will look to selectively acquire bolt-on brands that are strategic, financially accretive and provide significant synergies," he said.

At the moment, GCPL derives about 30 to 35 per cent of its Rs 4,851-crore revenues from international markets. This is expected to go up in the coming years as the company scouts for more buys.

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