Godrej Consumer to buy Latin America's Issue Group

After Asian and African buys, further step in strategy to be market leader in three continents.

Godrej Consumer Products Ltd (GCPL) today announced it had signed an agreement to entirely acquire the Argentina-based Issue Group for an undisclosed sum. The latter has a significant presence in many Latin American countries in the hair and skin care segments.

The deal size was over Rs 230 crore, according to analysts. This comes barely 10 days after GCPL said it was acquiring the remaining 51 per cent stake of US-based Sara Lee Corporation in their joint venture, Godrej Sara Lee.

Apart from Argentina, the Issue Group has significant presence in Peru, Uruguay and Paraguay, besides a rising one in Brazil.

The hair colourants market in Argentina is estimated to be around $200 million and growing at a compounded annual rate of 22 per cent over the past two years. The Issue brand enjoys volume leadership in Argentina, with a market share in excess of 20 per cent. The business had revenues of over $33 million in 2009.

The acquisition is valued at approximately eight times Ebitda (earnings before interest, taxes, depreciation and amortisation) and expected to pull up earnings per share right in the first year, according to the management. Elara Capital provided advisory support for the transaction.

Global strategy

GCPL Chairman Adi Godrej said: “The Issue Group provides us the perfect platform for establishing a strong presence in the fast growing hair colour markets in Latin America. It enjoys market leadership in many countries in South America. We also hope to use the strength of the offerings of the company and our own innovation funnel to create a sizeable business in hair colours.”

Adding: “The acquisition represents another important step towards GCPL becoming a leading emerging markets’ multinational and dovetails well with our global 3 by 3 strategy — presence in three continents, Asia, Africa and Latin America, through three core categories — home care, personal wash and hair care.”

A Mahendran, Director, FMCG Portfolio Cell, added: “We also believe the opportunities for capitalising on the strengths of this business across our entire hair colours business are significant.”

It was only on May 14 that GCPL announced a Rs 1,055-crore deal, subject to shareholder approval, for acquisition of the entire stake in Godrej Sara Lee. It is expected to complete the transaction by June 1, according to Adi Godrej. The acquisition will help GCPL catapult into one of the biggest in the home and personal care segment in India. Along with the Megasari acquisition in Indonesia, this transaction confirms GCPL as the second-largest household insecticide company in Asia (outside Japan).

Apart from Megasari, GCPL had also bought Tura in Nigeria (for Rs 400-500 crore). Tura was the third acquisition by GCPL in the African continent in recent years. The first two, Rapidol and Kinky, were acquired in South Africa in 2006 and 2008, respectively.