Wadias to buy French firm's 25.5% stake; IPR dispute on Tiger remains unresolved.
The Wadia group today settled its two-year-long dispute with Groupe Danone SA over control of Britannia Industries. Ending their 15-year-old association, the Wadias and Danone have reached a deal under which the French company will exit Britannia and sell its 25.5 per cent stake.
Leila Lands, a Mauritius-based investment firm and a wholly-owned subsidiary of Bombay Burmah Trading Corporation, a Wadia group company, will buy the French firm’s indirect stake in Britannia on April 14, according to a statement to the Bombay Stock Exchange today.
Although both the groups were tightlipped on the details, Wadia group executives, who did not want to be identified, said the acquisition price would be around Rs 750 crore, valuing Britannia at around Rs 3,000 crore.
Wadia group sources said a little over 6 million shares were expected to change hands at around Rs 1,200 per share amounting close to Rs 750 crore. Wadia group sources indicate that the reserves for this buyout will be raised outside India.
Britannia’s standalone turnover was Rs 2,584 crore in the year ended March 2008 and the Wadia group recorded a turnover of Rs 4,176 crore in the same period.
Danone and the Wadia group own equal stakes in Associated Biscuits International Holdings, Britannia’s controlling shareholder. The acquisition will increase the Wadia group’s stake in Britannia to 51 per cent from 25.5 per cent.
Danone’s move to exit the biscuits business in India comes more than a year after it globally sold its biscuits business to Kraft to focus on the dairy business.
Both companies have been in discussions to untangle differences over issues that range from intellectual property rights in Britannia’s popular Tiger brand, a minority stake purchase by Danone in Bangalore-based nutraceuticals firm Avesthagen, and Danone’s application to the Indian government to do business in India on its own.
A legal case is underway at a court in Singapore over the IPR issue after Danone allegedly used the Tiger brand to sell biscuits in certain global markets without prior permission from the Wadias. Britannia had said Danone had registered the Tiger brand in 70 countries without its consent.
| BRITANNIA INDUSTRIES PERFORMANCE | ||||
| Year ended | Quarter ended | |||
| Mar-08 | Jun-08 | Sep-08 | Dec-08 | |
| Net sales | 2584.11 | 693.3 | 838.54 | 818.28 |
| PAT | 191.01 | 40.3 | 53.3 | 46.15 |
| Standalone figure in Rs crore | ||||
| HOW THE COOKIE CRUMBLED (The Wadia group and Danone tussle) |
| JUNE 2006: Danone registers the Tiger trademark in over 70 countries without prior consent. Britannia demands royalty from Danone for use of Tiger brand in Asia. Danone also asks Britannia for royalties for using its trademark recipes and brands such as Little Hearts |
| OCTOBER 2006: Danone invests in a Bangalore-based bio nutrition company Avesthagen in October 2006 in violation of the government's Press Note 1, 2005, which requires a foreign company to obtain the consent of its Indian joint venture partner before pursuing an independent business in a similar area |
| JANUARY 2007: Britannia opposes Danone’s plans to go solo in India for its dairy and foods business by pressing for its rights of first refusal |
| SEPTEMBER 2007: The Foreign Investment Promotion Board of India rejected Danone’s claims that it does not need a non-compete waiver from the Wadias |
A company spokesperson, however, told Business Standard that the Tiger brand trademarks issue and stake sale by Danone are two different issues and the company would not like to comment on it.
Groupe Danone is also expected to buy out the Wadia Group’s stake in another joint venture, Wadia BSN, a move that could pave the way for Danone going solo for its beverages and yoghurt operations in India. Indian joint venture rules require foreign companies to gain the consent of their local partner before starting on their own. Company officials declined to clarify whether the Indian company had given its consent.
Danone can introduce bottled water brands like Evian Mineral Water and Aqua and its baby nutrition brands like Gallia, Nutricia, Cow & Gate in India. "These product lines would not be a competition to Britannia," industry experts said. An email questionnaire to Danone enquiring about its India plans remained unanswered.
Britannia closed up 3.6 per cent at Rs 1,479 at the Bombay Stock Exchange today after gaining as much as 18 per cent in early trading.
