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ITC on Friday said it had entered into an agreement with health and pharmaceuticals major Johnson & Johnson to buy two of its brands — Savlon, a brand of antiseptic soaps and liquids, and Shower to Shower, a prickly heat powder.
The deal, signed between ITC, Johnson & Johnson Ltd India and Johnson & Johnson Pte Ltd Singapore, marks ITC’s first acquisition in the personal care segment. The move is part of the company’s strategy to diversify its non-cigarette fast-moving consumer goods (FMCG) portfolio, which recorded revenue of Rs 8,100 crore in 2013-14.
“This is in line with ITC’s aspiration to achieve revenue of Rs 1,00,000 crore from the new FMCG businesses by 2030,” said an ITC spokesperson.
The agreement, subject to regulatory approvals, will enable ITC to use the trademarks and other intellectual property associated with the two brands for primary use in India. While the company has not disclosed the size of the deal, analysts estimate it at Rs 180-200 crore overall. That would mean ITC has paid twice the revenue generated by both brands in the last financial year.
An analyst with Prabhudas Lilladher said in FY14, Savlon and Shower to Shower had recorded clocked turnovers of Rs 65 crore and Rs 25 crore, respectively.
With the acquisitions, ITC will compete against Reckitt Benckiser’s Dettol and Hindustan Unilever Ltd (HUL)’s Lifebuoy brands. Savlon, a heritage brand of J&J, is part of the company’s oral and wound-care portfolio, with a market share of eight per cent. In the antiseptic segment, it is a distant second, behind Dettol.
In 1999, HUL (then HLL) had an agreement with Johnson & Johnson through which it was allowed to use the Savlon brand to sell antiseptic soaps, under a royalty payment arrangement. That was, however, called off in early 2000, when HUL decided to focus on its power brands.
Other than soaps, the Savlon portfolio includes antiseptic liquid and handwashes.
“The acquisition will have a modest impact on ITC’s top line, but given ITC’s strong distribution network, it could capitalise on the strong value of the two brands and launch its own products. This acquisition would pay off in the next two-three years, when the company scales up investment,” said an analyst.
Some analysts say the company could also consider brand extensions.
Investors appeared to be upbeat about the acquisition, with the ITC stock closing at Rs 378.05 on the BSE on Friday, up 2.01 per cent.
The company’s non-cigarette FMCG business broke even in 2013-14, after being launched about a decade ago. Its personal-care business, which includes soaps, shampoos and deodorants, is worth about Rs 900 crore. In terms of size, it is second to the food segment (which accounted for 70 per cent of ITC’s sales in FY14). With the addition of the Savlon and Shower to Shower brands, ITC’s turnover from the personal care segment is slated to touch Rs 1,000 crore this year.
WIDENING PORTFOLIO
Savlon’s turnover: Rs 65 crore (2013-14)
Shower to Shower’s turnover: Rs 25 crore (2013-14)
Estimated deal size: Rs 180- 200 crore
ITC’s personal care business is worth around Rs 900 crore
Savlon’s portfolio includes antiseptic liquid, soaps and handwashes
The deal, signed between ITC, Johnson & Johnson Ltd India and Johnson & Johnson Pte Ltd Singapore, marks ITC’s first acquisition in the personal care segment. The move is part of the company’s strategy to diversify its non-cigarette fast-moving consumer goods (FMCG) portfolio, which recorded revenue of Rs 8,100 crore in 2013-14.
“This is in line with ITC’s aspiration to achieve revenue of Rs 1,00,000 crore from the new FMCG businesses by 2030,” said an ITC spokesperson.
The agreement, subject to regulatory approvals, will enable ITC to use the trademarks and other intellectual property associated with the two brands for primary use in India. While the company has not disclosed the size of the deal, analysts estimate it at Rs 180-200 crore overall. That would mean ITC has paid twice the revenue generated by both brands in the last financial year.
An analyst with Prabhudas Lilladher said in FY14, Savlon and Shower to Shower had recorded clocked turnovers of Rs 65 crore and Rs 25 crore, respectively.
With the acquisitions, ITC will compete against Reckitt Benckiser’s Dettol and Hindustan Unilever Ltd (HUL)’s Lifebuoy brands. Savlon, a heritage brand of J&J, is part of the company’s oral and wound-care portfolio, with a market share of eight per cent. In the antiseptic segment, it is a distant second, behind Dettol.
In 1999, HUL (then HLL) had an agreement with Johnson & Johnson through which it was allowed to use the Savlon brand to sell antiseptic soaps, under a royalty payment arrangement. That was, however, called off in early 2000, when HUL decided to focus on its power brands.
Other than soaps, the Savlon portfolio includes antiseptic liquid and handwashes.
“The acquisition will have a modest impact on ITC’s top line, but given ITC’s strong distribution network, it could capitalise on the strong value of the two brands and launch its own products. This acquisition would pay off in the next two-three years, when the company scales up investment,” said an analyst.
Some analysts say the company could also consider brand extensions.
Investors appeared to be upbeat about the acquisition, with the ITC stock closing at Rs 378.05 on the BSE on Friday, up 2.01 per cent.
The company’s non-cigarette FMCG business broke even in 2013-14, after being launched about a decade ago. Its personal-care business, which includes soaps, shampoos and deodorants, is worth about Rs 900 crore. In terms of size, it is second to the food segment (which accounted for 70 per cent of ITC’s sales in FY14). With the addition of the Savlon and Shower to Shower brands, ITC’s turnover from the personal care segment is slated to touch Rs 1,000 crore this year.
WIDENING PORTFOLIO
Savlon’s turnover: Rs 65 crore (2013-14)
Shower to Shower’s turnover: Rs 25 crore (2013-14)
Estimated deal size: Rs 180- 200 crore
ITC’s personal care business is worth around Rs 900 crore
Savlon’s portfolio includes antiseptic liquid, soaps and handwashes
