Godrej Foods and Beverages, the foods unit carved out of two other Godrej group companies, is set to buy Nutrine Confectionery for about Rs 270 crore in the largest single brand acquisition in the fast moving consumer goods industry, people familiar with the matter said.
Mumbai-based Godrej Foods will be joined in this transaction by IL&FS Investment Managers, the private equity fund promoted by IL&FS Financial Services. This will be the first-ever instance of a private equity fund teaming up with a large business house for a big domestic buyout.
Godrej, IL&FS and other associates will buy 100% of Nutrine Confectionery for about Rs 270 crore, valuing the Chittoor-based firm at 1.6 times its revenue and about 10-11 times its earnings before interest, tax, depreciation and amortisation (EBITDA). IL&FS is believed to have contributed about Rs 90 crore to the transaction. Shahzad Dalal, vice chairman and managing director of the fund, could not be contacted for comments.
Bangalore-based MAPE Advisory Group advised Godrej on the deal, people close to Nutrine said. RSM & Co conducted the due diligence on behalf of Godrej, they added. A senior Godrej group official declined comment.
The deal marks a complete exit from the sugar boiled confectionery business for the descendants of B Venkatrama Reddy, who founded the company in 1952. Nutrine has since then grown into a household name, especially in the southern region of the country.
The family had been open to selling the business for nearly a decade now. Cadbury and Nestle had sniffed at it in the 1990s and recently Actis, the UK-based private equity investor, had very nearly struck a deal.
Godrej's acquisition is the largest-ever single brand deal in the fast moving consumer goods industry, dwarfing Marico's purchase of Nihar coconut oil from Hindustan Lever for about Rs 216 crore.
Other deals such as Godrej's buyout of Transelektra (Rs 105 crore), Colgate's acquisition of Cibaca (Rs 131 crore) and Dabur's deal with Balsara Hygiene (Rs 178 crore) were smaller in size.
The deal gives Godrej an established, well-known brand in the sugar boiled confectionery business and in the overall foods sector.
Godrej Foods and Beverages was formed after a complex restructuring exercise within the Godrej group. Until March '01, the company was called Godrej Soaps. The consumer products business, comprising soaps such as Cinthol and hair dyes, was spun off into Godrej Consumer Products and Godrej Soaps was renamed Godrej Industries with the chemicals and foods business.
Then in '02, the manufacturing, sales and support functions of Godrej Foods were merged with GIL. But this set-up did not last long. When Pranab Barua, formerly of Hindustan Lever and Reckitt & Coleman, and A Mahendran of Godrej Sara Lee formed Godrej Tea, the group transferred the entire foods business of GIL to Godrej Tea. Godrej Tea has now been renamed Godrej Foods and Beverages.