Everstone to buy HUL's Modern bakery biz

Fifteen years after acquiring Modern Foods from the central government, Hindustan Unilever Ltd (HUL), India's largest consumer goods company, is set to offload the bread and bakery business to private equity major Everstone.

On Tuesday, HUL said it had signed an agreement to sell the business, along with related brands and assets (including Modern' six factories), to Everstone-controlled firm Nimman Foods Pvt Ltd. The deal, according to people in the know, is valued at Rs 250 crore.

HUL said the divestment was part of its decision to exit non-core businesses.

"Since its acquisition in 2000, HUL has strengthened the Modern business, driven consistent top line growth and significantly improved profitability. Having turned around the business and built a sustainable growth model, we believe the sale to Everstone will unlock the full potential of the Modern brand," said Sanjiv Mehta, managing director and chief executive of HUL.

Analysts said the bakery business, part of HUL's packaged foods business, was stuck in a fragmented market that included both national and regional players. Britannia is among Modern's national-level competitors.

"Modern is a marquee brand, with strong recall and a long standing history. Everstone is committed to making significant investments in not only unlocking the brand's true potential, but also, once again, managing it as an independent company," said Sameer Sain, co-founder and managing partner of the Everstone Group.

On the cards is re-branding of the holding company, Nimman, to Modern by early next year, apart from consolidation of the firm's operations.

Those in the know say Everstone will position the company as an independent entity, with a separate management; it might also list the company in a few years. The plan is to increase the firm's turnover to Rs 1,000 crore in the next few years by aggressively tapping the bakery market. Currently, Modern has a staff of 350-400. People in the know said these people would now move to the new entity. While a professional management is yet to be put in place, Everstone is, in the interim, expected to assign a few of its senior team members to top positions at the firm.Everstone had reportedly been in talks with HUL for about a year. While the talks initially revolved around the two setting up an equal joint venture to run the business, it finally veered towards a complete takeover of Modern sources said. Everstone, which has assets under management of $3 billion, has bet big on the food and beverage segment in emerging markets. Companies in which it has invested include Blue Foods, JS Hospitality Services and Burger King (through F&B Asia, a separate fund created by it).