Colgate parent to shed 20% to Singapore arm

The deal could fetch the Colgate-Palmolive Company about Rs 529.4 cr.

As part of its regionalisation strategy, Colgate-Palmolive Company is transferring a large chunk of its 51 per cent holding in Colgate-Palmolive India Ltd to its Singapore-based 100 per cent subsidiary, Colgate-Palmolive Asia (Pte) Ltd.

Colgate-Palmolive Asia (Pte) Ltd has sought the Indian government's approval to buy 27.2 million equity shares of Colgate-Palmolive (India) from Colgate-Palmolive, New York, representing a stake of roughly 20 per cent.

The deal will be transacted on the floor of the stock exchange at the prevailing market price. At Colgate-Palmolive India's closing price of Rs 194.65 on the Bombay Stock Exchange on February 11, it could fetch the Colgate-Palmolive Company about Rs 529.4 crore.

As the acquisition of shares by Colgate-Palmolive Asia (Pte) Ltd falls within the definition of promoter group, the transaction will not trigger the takeover code of the Securities and Exchange Board of India and the company is not required to follow it with an open offer for another 20 per cent stake.

Once the transaction has been completed, Colgate-Palmolive Asia (Pte) Ltd will hold 20 per cent in the Indian company and the US-headquartered parent's stake will come down to 31 per cent. The remaining 49 per cent stake in the company is held by banks and financial institutions (14.95 per cent), other investors (1.55 per cent) and the public (32.5 per cent).

Colgate-Palmolive Asia (Pte) Ltd is an investment arm of Colgate-Palmolive Company and also undertakes the marketing and sale of consumer goods. Its existing paid up share capital is 20 million Singapore dollars.

Sources said the company had approached the government for the approval to the proposed transaction, although such a transaction between residents outside India does not require the approval of the Foreign Investment Promotion Board or the Reserve Bank of India (RBI).

As per the plans of the US consumer goods major, the payment for the acquisition of the shares would be undertaken by Colgate Palmolive (Asia) through an inward remittance of foreign exchange and settled through the usual channels. Besides, the proceeds from the sale of the shares will also be converted into dollars and remitted to the US.

Colgate Palmolive India posted a net profit of Rs 28.54 crore for the quarter ended December 31, 2004 as compared to Rs 27.45 crore for the quarter ended December 31, 2003. Total Income fell by 6 per cent to Rs 235.8 crore for the quarter ended December 31, 2004.

The company has also made substantial investments in India over the last few years. For the period ended December 31, 2004, Colgate Palmolive India has incurred capital expenditure to the tune of Rs 53 crore to build a state-of-the-art toothpaste unit at in Baddi, Himachal Pradesh.