Godrej acquires 74% in HLL's animal feed unit

Godrej acquires 74% in HLL's animal feed unit
ENS ECONOMIC BUREAU

MUMBAI, JAN 15: Godrej Agrovet Ltd, a subsidiary of Godrej Soaps Ltd, a leading player in the animal feeds and agricultural inputs market, has entered into a joint venture agreement with Hindustan Lever Ltd (HLL) to acquire 74 per cent in Gold Mohur Foods & Feeds Ltd (GFFL).

GFFL was floated as a wholly owned subsidiary by HLL for its animal feeds business which the multinational wanted to divest. The joint venture agreement also entails the transfer of HLL's animal feeds brands to GFFL.

As per the agreement, which was entered in on Sunday and is effective from January 1, 2001, HLL will continue to hold a strategic 26 per cent stake in GFFL. While the cost of the acquisition was not disclosed, Godrej Agrovet will fund the acquisition through borrowings and internal accruals.

Addressing a press conference on Monday, Godrej Soaps chairman Adi Godrej said: "It will make Godrej Agrovet the leader in its major area of animal feeds business. It will also derive considerable synergies in the business as GFFL leads in animal feeds and Agrovet in the poultry and cattle feed. The joint venture will bring together skills in R&D in both the companies."

The combined market share of the joint venture in the animal feeds business will be to the tune of 25 per cent. The board of the joint venture company will comprise eight directors -- three from HLL, and five from the majority owner Godrej Agrovet. Godrej Agrovet chairman Adi Godrej will be the chairman of the company, and GFFL managing director Arjun Uppal will continue be the head.

GFFL is the largest player in this business with a turnover of close to Rs 300 crore. It sells its animal feeds under brand name "Gold Mohur" which has a strong equity in the poultry and cattle feed market. Godrej Agrovet sells its animal feeds under the brand names "Bypro", "HPMR", "Milk More", "Crumbro", among others. The distribution networks will continue to operate separately. The entire animal feedstuff market volume stands at three million tonne.

With a turnover of about Rs 350 crore, Godrej Agrovet employs more than 800 employees and has 26 manufacturing units across India. GFFL employs 375 employees. Lazard Credit Capital has structured the deal for Godrej Agrovet.

According to an HLL spokesperson: "HLL decided to retain 26 per cent in the company in the best interest of all shareholders. Securing board level positions is in the long term growth of the company and will enable HLL to understand skills in the forward integration chain."

HLL had earlier announced its intention to exit the animal feeds business to align its business focus with that of its parent company Unilever. It hadtransferred the anumal feed business to a wholly owned subsidiary (GFFL) in April 2000.