Deal worth Rs 89 crore, to buy rest of stake, too; aims at growing subsidiary 40% yearly for next 5 yrs
In a Rs 89-crore deal, Hindustan Sanitaryware and Industries Ltd (HSIL), the ceramics major, has entered into a share purchase agreement with Garden Polymers Pvt Ltd and its promoters, acquiring 60 per cent stake in the company. The balance 40 per cent is being bought over by the promoters of HSIL on the same terms.
Sandip Somany, joint managing director, HSIL, said, “This is a synergistic acquisition to capitalise on collective benefits of both companies. Our container glass business division contributed 52 per cent of the total turnover last fiscal. It is an important category for us. With acquisition of Garden Polymers, we would be able to cater to our customers' demand for PET bottles, too, along with glass containers. Garden Polymers made a turnover of Rs 104 crore last year. It is a profitable company and the acquisition is value-accretive for HSIL shareholders from day one. We aim at growing this subsidiary over 40 per cent every year for the next four-five years.”
Garden Polymers manufactures PET bottles, caps and closures, supplying to premier customers in the liquor, pharmaceuticals and fast moving consumer goods segments. Somany adds, “We posted Rs 1,110 crore turnover last year. We thought of splitting the deal in two routes -- first, not to put excessive debt pressure on the company directly, as it already has huge investment plans for the year and, second, to retain shareholders’ interest in the newly acquired subsidiary. This would prove beneficial at the time of issuing an IPO (Initial Public Offer) of the subsidiary in the near future.”
While the whole deal is estimated at Rs 89 crore, HSIL has reportedly paid Rs 53.5 crore to Garden Polymers directly for acquiring the 60 per cent stake. HSIL’s container glass caters to major multinational companies such as Nestle, Coca-Cola, GlaxoSmithKline, United Spirits (USL), Unilever, Pernod Ricard, Dabur, Ranbaxy and Dr Reddy’s. Garden Polymers supplies PET bottles to companies such as USL, Aventis Pharma, Dabur, Wyeth and GlaxoSmithKline.
"This acquisition has synergies with HSIL’s container glass division, which has the same set of customers. With this, HSIL will be able to offer a wider range of packaging solutions to these customers. Besides liquor, pharmaceuticals and FMCG, other major users of PET bottles are food and beverages, edible oil, milk, mineral water and carbonated drinks, not yet explored by Garden, so growth avenues are plenty,” said Somany.
HSIL says Garden Polymers’ capacity is to now be expanded from making only PET bottles to PE, PP, HDPE and packaging. HSIL’s container glass business earned Rs 577 crore in 2010-11.
HSIL would get management control by end-July. Somany said, “We would formulate our plans within three-four months of final acquisition.”
On being asked about further acquisition, Somany said: “We continue to look at lucrative business offers. We are in talks with other companies for acquisitions and would be able to share details only when deals materialise.”
The rigid plastic packing industry in India is around Rs 16,000 crore annually and Garden is the fourth largest player in the organised PET bottles segment. The PET bottle market is expected to grow at a compounded annual rate of 14-15 per cent over the next five years.