Godrej Consumer buys Indonesian company

Godrej Consumer Products Ltd on Tuesday announced it has entered into an agreement to acquire Indonesian household care firm PT Megasari Makmur Group and its distribution company in Indonesia.

Megasari Group is a market leader in Indonesia in manufacturing and distribution of household products including insecticides, wet tissues, air fresheners, food wrappings, drain openers, bleach, metal polishers and rat glue.

The complete takeover of Megasari by Godrej would take around two months, A Mahendran, director, FMCG portfolio cell for the Godrej Group, said.

While Mahendran declined to divulge the acquisition amount, industry sources said the acquisition is estimated to be over Rs 1,000-1,200 crore. Megasari Group’s current turnover is $120 million.

Megasari has six factories in Indonesia located near Jakarta with a total of 652 employees.

According to Godrej, the acquisition is expected to be earnings
accretive from the first year.

The acquisition will help the group strengthen its market share in the household insecticides space in India, Sri Lanka, Nepal, Bangladesh and Indonesia, the company said.

Godrej Consumer in India runs household care business under subsidiary Godrej Sara Lee — its 49:51 joint venture with US-based Sara Lee Corp, which is internationally looking to sell its household care unit.

Godrej Consumer is interested in acquiring the remaining 51% stake in Godrej Sara Lee from Sara Lee, but Mahendran said the deal will take time.

Post Megasari takeover, Godrej Consumer will let Godrej Sara Lee take care of the operations. Megasari Group’s current management team will continue to be involved with the companies, too.

“Godrej Group will put in place a cross functional team consisting of current Megasari employees and Godrej’s team from India. We are the market leaders in Indian insecticide business, we will support Megasari with our expertise,” Mahendran said.

Some of Megasari’s brands include Hit, Stella, Mitu, and Simba.
“As an emerging market multinational, this acquisition is an important step in our global 3 by 3 strategy — presence in 3 continents - Asia, Africa and Latin America through 3 core categories — home care, personal wash and hair care,” Adi
Godrej, chairman, Godrej Consumer, said in the press note.

In December 2009, the Godrej Consumer board approved raising up to Rs 3,000 crore through debt and equity for mergers and acquisitions and Godrej said some of these funds were employed for the Megasari buyout.

However, analysts said though the topline of the firm will benefit, concerns about the FMCG firm’s bottomline remain. “What we have to look at is how the bottomline will move after this acquisition ... what is the price they have paid for this buy and if they are financing it with debt, what is the interest rate they are paying for it,” said an analyst with Prabhudas Liladher.
Megasari is Godrej Consumer’s fifth acquisition since 2005 after UK’s Keyline, South Africa’s Rapidol, Kinky, and Nigerian Tura.