Wadias may buy out Danone at discount

Danone chairman expected to meet Wadias on Sept 3.

The Wadias of Bombay Dyeing are poised to buy the entire stake of partner Groupe Danone in biscuit maker Britannia at a discount.

The contours of the deal are likely to be drawn up at a meeting on September 3. That is also the time when Danone Chairman Franck Riboud is expected to be in India.

Sources close to the deal said the French dairy foods giant's exit would be in line with that of other multinational companies from joint ventures in India and the discount in this case could be as much as 20 per cent to the market price.

Danone is keen on operating on its own in India and needs a no-objection from the Wadias to be able to do so.

At today's closing share price of Rs 1,560, Britannia Industries is valued at about Rs 3,800 crore.

The Wadias and Danone hold 50 per cent equity each in Associated Biscuits International (ABIL), which holds 51 per cent equity in Britannia, giving each partner control over 25.1 per cent equity of the joint venture.

An open offer to minority shareholders will not be necessary since this will merely be the transfer of a chunk of equity from one promoter to another.

A Danone spokesperson confirmed that Danone and the Wadias were planning to meet early September. The spokesperson for the Wadias did not comment.

The two partners began bickering last year over control of the Tiger brand, which Danone had reportedly taken to other countries without taking the Wadias into confidence. The brand was created and developed by Britannia and is its bigger money earner.

At the September 3 meeting, the two partners are also likely to discuss the thorny issues of intellectual property, Groupe Danone's acquisition of a stake in Bangalore-based nutritional foods company Avesthagen and the no-objection certificate that Danone needs to go solo.

Sources say the agreement for ABIL, signed in 1992, gives the first right of refusal to buy to each partner if the other wishes to sell its holding.

Danone has already stopped consolidating Britannia's accounts in its balance sheet. Accruals from Britannia are reflected as income from investment.