The Rs 1,300-crore fast-moving consumer goods (FMCG) major Dabur India today announced the acquisition of the Mumbai-based Balsara Hygiene and Home Products in a Rs 143 crore all-cash deal.
Dabur now has a passel of new products --- Balsara's oral care and household care products, including Promise, Babool, Sanifresh and Odonil.
That is not counting the company's manufacturing plants. Dabur will fund the acquisition with internal accruals of Rs 120 crore and debt of Rs 23 crore, which it plans to retire over the next two quarters.
"The acquisition is part of our inorganic growth strategy for which we had planned well in advance. The deal is in line with our plans to expand the company's scale of operations and strengthen its presence in the FMCG sector," said PD Narang, group director, Dabur India.
After receiving shareholder approval in April, Balsara will become a subsidiary of Dabur and its board will be reconstituted.
Dabur claimed the deal would help the combined business to leverage synergies in marketing, sales, distribution and procurement.
"Significantly, 44 per cent of Balsara's revenue comes from home care products and the oral care segment accounts for nearly 56 per cent. These are categories that have witnessed growth in excess of 15 per cent," said Sunil Duggal, chief executive, Dabur India, explaining the rationale behind the acquisition.
In the Rs 1,900 crore toothpaste market, which is dominated by Hindustan Lever and Colgate, Dabur's share will go up to nearly 8 per cent, with three Balsara brands in its kitty. Currently, Dabur has a negligible presence in the category, with a market share of 1.8 per cent.
In home care, estimated to be a nearly Rs 2,000 crore market, and which has grown at a compounded annual growth rate of 25 per cent, Balsara's Sanifresh is the second largest toilet cleaner brand after Reckitt Benckiser's Harpic.
"The Babool and Meswak toothpaste brands will be a good strategic fit for Dabur as they, too, are positioned as herbal products," added Duggal.
The Balsara group, which has factories in Silvassa, Kanpur and Baddi (Himachal Pradesh), recorded a turnover of Rs 200 crore in 2003-04, with a loss of Rs 8 crore. It is a strong player in the western and southern markets.
According to Dabur, it will retain most of Balsara's 600 employees after the acquisition.