 "Wipro acquires Chinese FMCG brand")
Wipro Consumer Care & Lighting, the fast-moving consumer goods (FMCG) arm of Wirpo Enterprises, has said it has signed a pact to acquire 100% shareholding in Zhongshan Ma Er Daily Products to boost its presence in the fast-growing toiletries and liquid detergent space in south China.
The deal, which is expected to gain regulatory approvals by the end of October, will be the company’s second largest acquisition after Unza Holdings, which it acquired back in 2007 for $246 million. Wipro did not disclose the financials of the deal citing a confidentiality agreement with the seller.
“From our perspective it’s a great acquisition because it doubles our revenue in China, ,making it our third largest market. The other interesting part is that we become very dominant in the Guangdong province,” said Vineet Agarwal, chief executive, Wipro Consumer Care & Lighting.
With a revenue run rate of around $75 million in the current financial year, Zhongshan Ma Er will help increase Wipro’s earnings from China to around RMB 1 billion ($150 million). Wipro says it will become among the top three players in the shower and liquid detergent segments in China’s Guangdong province.
Guangdong is one of the richest provinces in China with an annual GDP of around $1.1 trillion.
The acquisition will largely be funded by internal accruals, but Wipro could explore taking a small amount of short-term or long-term debt depending on the economic situation. The cost of acquisition excludes two manufacturing plants where Zhongshan Ma Er makes its products.
“We have a three-year pre-signed agreement to continue manufacturing and we can extend it based on mutual agreements. But, we already have two manufacturing plants in China; so, we can decide to expand that or we could setup a new facility,” added Agarwal.
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Zhongshan’s acquisition is especially significant given its portfolio of liquid detergent brands, which Wipro could leverage to serve its other markets. The company says liquid detergents are among the fastest growing categories in the FMCG sector in India, China, Malaysia, Vietnam, and West Asia.
After the completion of the acquisition, 55% of Wipro’s consumer care business revenues will be derived from foreign markets, compared to 51% at present. The deal will also take the company’s employee strength up to around 10,000 people, 25% of whom are in India.
Out of the $600 million that Wipro has invested in acquiring FMCG companies over the past 13 years, $500 million has been invested in companies in Southeast Asia and China. According to Agarwal, all the acquisitions made so far have yielded great revenue results for the company, with each being valued at 4-5 times their acquisition cost.