Pond’s to merge with Hind Lever

Announcing the merger/takeover plans here on Thursday, HLL chairman Keki Dadiseth said PIL and HLL have decided to appoint Y H Malegam of S B Billimoria & Co and Arun Gandhi of N M Raiji & Co as joint valuers to recommend the share exchange. As the first step, it has been decided that HLL will act as a merchant exporter for PIL exports.

"The two companies havesignificant overlaps in personal products, speciality chemicals and export businesses, besides a common distribution system since 1993 for personal products," Dadiseth said. He also announced HLL’s turnover of Rs 7,820 crore (net of excise), and Pond’s turnover of Rs 470 crore for the year ended December 1997.

It may be recalled that the merger of Pond’s with Hindustan Lever was in the air for quite some time. Brooke Bond Lipton India Ltd had merged with Hindustan Lever two years back, making HLL the largest detergent and foods company in India and third largest corporate in India after Reliance and Telco.

The multinational is also buying out the 50 per cent stake of the Tatas in its joint venture for cosmetics, Lakme Lever Ltd. Separately, Lever will also buy out the entire manufacturing facilities of Lakme Ltd at Deonar and Kandla in Gujarat, for a fair value to be decided upon by an independent valuer. This gross amount would be reduced in the hands of Lakme to the extent of tax and repayment ofexisting debts of Lakme Brands.

"The cash outflow for purchase of the Lakme brands and the Tata shares in Lakme Levers will actually be much less, Rs 130 crore, because Lakme Brands is expected to redeem, from the sale of Lakme trade marks, optionally convertible debentures worth Rs 70 crore held by Hindustan Lever,” Dadiseth said. Lakme Lever Ltd was promoted by HLL and Lakme Ltd with a shareholding of 50 per cent each in 1996.

Dadiseth said the speciality chemicals businesses of Hindustan Lever are looking for a joint venture partner. Unilever Plc had sold its speciality chemicals business to Imperial Chemicals Industries Plc in 1997, but this did not include its businesses in Indian subsidiaries.

The offer for purchase was made to the Tatas last month. The Lakme board, in agreeing to the offer, took into consideration "the increasing intensity of international and domestic competition and the need to keep on making further substantial investments in brand building, new product development andlaunches".

A Tata Services press release says: "The directors of Lakme Ltd felt that the high investment needed with consequent low returns would have diluted the earnings of the company over a relatively long period thereby affecting shareholder value. The directors are of the view that acceptance of the offer will best protect the shareholders’ interest."

As recently as August 26, 1997, Simone Tata, chairperson of the joint venture, had told shareholders that Levers would not take over the company. The AGM followed soon after the company had sold out its other major business, pharmaceuticals. The exit of the Tatas from the cosmetic segment comes under group chairman Ratan Tata’s plans to get out of all non-core areas. Tata has been quoted in the past as saying that the group is only interested in five or six main businesses.