Chasing Colours: Godrej Buys Argencos In Deal Spree

Godrej Consumer Products Ltd (GCPL) continues its foray into global markets with a big shopping cart. It has entered into an agreement to acquire 100% stake in Argencos, a mid-sized Argentine hair care company with a strong portfolio of brands including Roby and 919.

The latest deal closely trails GCPL’s  acquisition of South America based Issue Group, a leader in Argentina’s hair colour market with an over 20% market share. The combined sales of the two Argentine transactions would be over $45 million. The equity value for both transactions is approximately $43 million.

With these two buyouts, Godrej’s hair colour portfolio will now enjoy a volume market share greater than 25% in hair colours and almost 50% in hair styling sprays. Argencos, one of the largest player in the kit format in hair colours with an market share of 17% in the format, has a manufacturing plant located in La Rioja. The hair colour market in Argentina is estimated to be around $200 million growing at a CAGR of over 22% in the last two years.

Last month, GCPL had consolidated its domestic operations with the buyout of Sara Lee in their joint venture Godrej Sara Lee – which markets Good Knight, Hit and Jet brands – for $234 million. GCPL recently acquired Tura, a leading beauty brand in West Africa, and Megasari Group, a leading household care company in Indonesia. The acquisition of Issue Group which had revenues of $33 million in 2009 involves buying of a 100% stake in  Laboratoria Ceuna, Consell SA, Issue Uruguay and Issue Brazil. Though the deal size was not disclosed, Issue Group has been valued at 8 times EBITDA and is expected to be EPS accretive from the first year of operations.

VCCircle earlier reported that GCPL is also holding talks with private equity majors such as Carlyle, Standard Chartered Private Equity and ChrysCapital for raising around $130-$140 million as part of its overall capital-raising plans estimated at over $650 million to fund these acquisitions.

The key businesses of Godrej Consumer Products Ltd (GCPL) are spread across the personal care segments of soaps, hair colours, toiletries and liquid detergents, with most of them operating at margins of over 20%. In FY10, GCPL reported consolidated revenue of Rs 2,042 crore (up 47%) with net profit of Rs 340 crore (up 97%).

Adi Godrej, Chairman, GCPL, said: “Argencos is a perfect, complementary add-on to our earlier acquisition of Issue Group. I expect the combination of the two businesses to set us on a firm footing in achieving our plans for Latin America. The two companies provide us with a tremendous platform for establishing a strong presence in the fast growing hair colour markets in Latin America. Argentina and Brazil are leading vanguards of hair trends and innovations in hair care. We will have market leadership in many countries in South America including a presence in Brazil."

At the same time, the acquisition represents another important step towards GCPL becoming a leading emerging markets multinational and dovetails well with 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. Over the last few years, we have been following a very disciplined and focused approach to identifying acquisitions that represent a strong fit with our business, both strategically and operationally, he added.

A. Mahendran, Director, FMCG Portfolio Cell, added: “The acquisitions of Issue and Argencos are important steps in establishing our footprint in Latin America. We continue to stay true to our battle-tested approach of acquiring pioneering local brands with strong leadership positions in attractive geographies that have demonstrated an excellent track record of results and are run by seasoned management teams. These companies have a rich heritage of over a quarter of a century in serving the needs of the Latin American consumer through innovative and complementary offerings. We also believe that the opportunities for capitalizing on the strengths of these businesses across our entire hair colors business are significant.”

According to a recent Angel Broking report, GCPL is expected to post a 15% CAGR in the top-line and a 14% CAGR in earnings during FY2010-12E, as the benefits of price hikes fade out, GSL’s consolidation effect forms a base and Gross Margin expansion peaks out. "With GCPL’s wider portfolio, stronger performance of its international business, the likely acquisition of the remaining 51% stake in GSL from Sara Lee and a potential upside trigger from further acquisitions (likely in Latin America), we believe that the stock still offers significant triggers for sustained performance," the report said.

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News Roundup: GMR Energy Raises Rs 350Cr From IDFC

GMR Energy Raises Rs 350Cr From IDFC - GMR Energy, the flagship power venture of GMR group, has raised Rs 350 crore from IDFC Group for a significant minority stake. The fund raise is part of GMR Energy’s plan to raise Rs 1,600 crore through the equity route to meet its immediate requirement. This is the second round of equity fund-raising as it had raised $200 million from Singapore-based private equity (PE) firm Temasek and Rs 300 crore from ICICI Bank through preference share allotment in April this year. (ET)

Hindujas Eye $1B Via Petromin IPO - The Hinduja Group, a diversified company, is planning to raise up to $1 billion through the initial public offering (IPO) of the Saudi Arabia-based lubricants maker Petromin. Petromin is a 50-50 joint venture between Gulf Oil International, a Hinduja Group company, and the Dabbagh Group of Saudi Arabia. The company plans to dilute 30% of Petromin through the public offer. The company is currently finalizing the timeline and the valuations. The group is also looking at an IPO for Gulf Oil Marine, its Hong Kong-based unit that is into marine lubricants and technical services for the shipping sector. (ToI)

Godrej Buys Out Argencos In Latin America - FMCG major Godrej Consumer Products Ltd has acquired another Argentinian hair care company called Argencos, making it the company’s second buyout in Latin America in less than two weeks. It had earlier acquired Latin America’s Issue Group, a market leader in hair-colour in Argentina, Peru, Uruguay and Paraguay in the last week of May. The company believes the combination of the two businesses will help the firm establish a strong foothold in achieving its plans for Latin America. (ET)

NTPC To Buy Coal Mine In Australia - National Thermal Power Corporation (NTPC), India’s largest power producer, is set to acquire controlling interest in a 720-million-tonne coal field in Australia in a deal valued at $1-1.5 billion, which will help it to fire about 3,500 mw of power capacity. The coal mines, located near Perth in western Australia, will allow NTPC to bring home up to 10 million tonnes of coal annually for its plants. NTPC needs about 125 million tonnes of coal annually for existing power plants and imports 10 million tonnes to meet the gap. The imports are expected to cross 30 million tonnes by 2017. (ET)

3i Growth Capital To Hike Stake In UFO Moviez - UFO Moviez India Ltd, a satellite-based digital cinema network, plans to invest around Rs 250 crore to convert 1,000 screens in the country to 3D over the next two years. The company plans to fund the expansion through a mix of internal accruals and equity. For the equity part, UFO Moviez  is tied up with 3i Growth Capital, a venture and private equity firm, which currently holds a 35% stake in the company. The current turnover of the company is Rs 50 crore, and is expecting break-even in the next 3-years. (ET)

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Media Firm Avitel Raises Rs 50Cr From HSBC Asian Ventures Fund 3

Avitel Post Studioz Ltd, a Mumbai-based company providing post-production and related services to the media & entertainment industry, has raised Rs 50 crore from The HSBC Asian Ventures Fund 3 Ltd, a $700-million closed-end fund for private equity investment in Asia. The fund is advised by the HSBC Private Equity Asia Ltd (HPEA) Group. 

With this, James Savage, a director at HPEA, will join the board of Avitel, said a company statement. Standard Chartered–STCI Capital Markets Ltd acted as the sole financial adviser in the transaction.  

Avitel has raised the fund to expand its business as it plans to utilise the capital to establish an export oriented unit for animation and post production services, as well as scale up its existing facilities catering to the domestic film and advertising markets. The company also plans to recruit around 300 professionals in the next two years. 

Avitel launched its operation 35 years ago, and currently has a strong presence in the domestic post production market, focusing both on feature film and advertising industry. The domestic post production and visual special effects industry in India is estimated at Rs 1,000 crore, and is expected to grow at a CAGR of 18% over the next 3-5 years, added the statement. Avitel is also planning an initial public offering (IPO) over the medium term. 

Besides post production activities, Avitel also offers film archiving and restoration services for clients in both domestic and export markets. The company is currently working with the Information and Broadcasting (I&B) Ministry of India, and some other overseas television channels for library restoration. 

Avitel has also recently diversified into the animation market, and has been developing an animation project with a British film production company, including creative and pre-production for the overseas markets. 

Pradeep Jain, chairman, Avitel Group, said, in the statement, “With animation work orders worth Rs 150 crore in hand, we plan to recruit around 300 professionals in the next two years in areas of script writing, direction, production set-up, production pipeline design, animation skills and management, to match the timeline for our global projects.”

Alok Gupta, director and head of Venture Investment at HPEA, said, “The management team has demonstrated great operational skills in building a robust and diverse business model. We intend to support Avitel in its growth and expansion plans through our network and reach in other Asian markets.” 

HPEA is the Asian private equity arm of the HSBC Group. It advises both expansion capital and buyout focused private equity funds as well as venture funds. While the private equity funds focus on mid-market expansion capital and buy-out transactions in Asia, the venture funds focus on small and mid-sized technology and consumer focused companies.

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Facebook, It’s OK To Want To Make Money [Video]

Facebook is not evil, despite the disproportionately loud grumblings of its critics — which (as Mark Zuckerberg recently pointed out) is a small fraction of its 400-million-plus user base. But Facebook is also not a non-profit despite Zuckerberg’s claim that they’re not in “this for the money.”

On Wednesday’s press conference, Zuckerberg said: “It might seem weird, we’re not doing this to make more money. For all the people inside the company, that could not be more true. It’s such a big disconnect that we’re doing this for the money.”

Methinks the Zuckerberg doth protest too much.

Zuckerberg is not a saint and he’s also not the same 19-year old who allegedly mocked his users for trusting him with their information, but somewhere in between lies reality. He’s a CEO and he runs the world’s most powerful social network. Following Wednesday’s announcement, he spoke with NPR, and acknowledged that Facebook needs money from advertisers to operate, “to run a service like this that serves more than 400 million users.” However, no one believes that Facebook is trying to make just enough money to keep the lights on, nor should we expect them to. But we can expect a higher level of honesty and transparency. Mark, it’s OK to want to make money (and heaps of it), just don’t pretend that every action is designed to augment the user experience.

You could argue that Zuckerberg’s comment (“we’re not doing this to make money”) was just a throwaway line, that I’m reading too much into it. However, it seems to be an emerging tagline for the entire company, on par with Google’s “don’t be evil.” His comment echoes a similar statement from Facebook’s VP of product, Chris Cox, during a backstage interview on Tuesday:

Cox says, “Anybody who knows Mark knows that he’s not doing this to make money…none of the changes we’re making are fundamentally about making money. That’s just not how the company rolls, that’s not how we’ve ever rolled.” Cox acknowledged that Facebook is trying to build “a great ads product,” but he immediately reiterated the idea that money is “not the motivating force behind a lot of the stuff that we’re rolling out.” When I pressed him on the issue of Facebook credits and the rich 30/70 breakdown (Facebook effectively gets 30% of a developer’s proceeds), he said it helps developers by establishing an official currency, similar to the Euro. That’s all well and good, but it doesn’t justify Facebook’s 30% commission nor does it dovetail nicely with a company trying to project an indifference to profits. Will the real Facebook please stand up?

Zuckerberg seems to be genuinely interested in changing the world, after all he did reject significant buyout offers, but he also seems to be genuinely interested in turning Facebook into a multi-billion-dollar machine. As I said earlier, I have no problem with a profitable Facebook making obscene amounts of cash, I’m just imploring Zuckerberg to portray his mission honestly.

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Khazanah’s $835M Parkway Offer Pits It Against Fortis

Malaysia’s sovereign fund Khazanah launched an $835 million offer to gain control of Singapore’s largest private healthcare provider, Parkway Holdings, setting it against Fortis Healthcare.

Thursday’s offer comes just two months after hospital chain operator Fortis bought a 23.9 percent stake in Parkway from U.S. buyout firm TPG for $685 million.

A spokeswoman for Fortis Healthcare said she had no immediate comments on Khazanah’s offer.

Khazanah’s Integrated Healthcare unit offered S$3.78 a share for Parkway shares or a premium of 25 percent over Parkway’s last traded price. This will allow it to raise its stake in the Singapore firm to 51.5 percent in a S$1.18 billion ($835 million) deal. Currently, it has a stake of nearly 24 percent.

CIMB and Deutsche are financial advisers to Khazanah’s unit.

In March, Fortis said it had no immediate plans to raise its stake in Parkway and planned to work with the Singapore firm in expanding across the region. Fortis Chairman Malvinder Mohan Singh was to be nominated as chairman of Parkway.

"The partial offer enables Parkway shareholders to realise the value for some of Parkway shares now, at a significant premium to its last closing price, and at the same time retain an interest in its exciting future," Ahmad Shahizam Mohd Shariff, director of Khazanah’s unit Integrated Healthcare said in a statement.

Khazanah said the group plans to consolidate its existing stakes in Parkway, Pantai, Apollo and IMU to become Asia’s premium regional healthcare platform.

Shares in Fortis Healthcare rose as much as 8.2 percent after Malaysia’s sovereign fund Khazanah offered to raise its stake in Singapore healthcare firm Parkway Holdings, in which the Indian firm owns a 25 percent stake.

At 0421 GMT, Fortis shares were trading 6 percent higher at 148 rupees in a Mumbai market that had gained 0.2 percent.

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