Hershey, Americaâ€™s largest chocolate and confectionery maker, has got
clearance from the foreign investment promotion board (FIPB) to acquire
a 51% stake in Godrej Beverages and Food for Rs 238 crore. The deal
would mark the exit of financial investor IL&FS from the venture
while the holdings of the Godrej group and that of an individual
investor â€” A Mahendran â€” would come down.
The FIPB approval was required since 100% FDI is permitted only for manufacturing activities under the automatic route. However, in this case, the foreign company is picking up a majority stake and will become the holding company.
The $5-billion Hershey group would be picking up the majority stake through a host of transactions. This would include acquiring the 40% equity held by IL&FS, Godrej Industries and Mr Mahendran as also subscription to fresh issue of capital in the company.
Simultaneously, Hershey would license Godrej Beverages & Food some of its trademark rights for a lump sum payment of about $2 million in addition to royalty payments of 5% for domestic sales and 8% for exports.
Post acquisition, Hershey would hold 51% equity while Godrej Industries would hold 43% stake. The remaining 6% will be held by A Mahendran, a senior executive with the Godrej group. The deal would value the equity stake of Godrej Industries, a listed arm of the Godrej group, at Rs 200 crore.
Godrej Beverages & Food represents the foods and beverages business of the Mumbai-based Godrej group. It was formed last year when Godrej Industries transferred its foods division to another group company, Godrej Tea. The combined entity was renamed as Godrej Beverages & Food Ltd.
With a turnover of around Rs 400 crore, the company is engaged in categories such as tea, edible oils, health drinks, including soymilk, tomato puree, fruit drinks and bakery fats. Its brand portfolio includes Jumpin range of fruit drinks, Xs fruit juices, Sofit Soymilk, Sofit Ready to Eat Cereals, Godrej Tea, Godrej Vanaspati, Cooklite Sunflower Oil and Godrej Tomato Puree.
However, the main attraction for Hershey would be the confectionery business where at one shot it would become the largest player in the domestic confectionery market. Godrej Beverages & Food had acquired Nutrine, the largest domestic confectionery brand, along with its assets in June last year in a deal worth Rs 250 crore from the south-based Reddy family.
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