Will acquire the African hair extensions company in three phases; acquisition to be funded through internal accruals and debt.
Mumbai-based Godrej Consumer Products Ltd (GCPL) has entered into an agreement with African hair care company Darling Group Holdings to acquire 51 per cent stake in the firm.
Darling operates in 14 countries in sub-Saharan Africa. Its flagship brand shares the name of the firm, with a second brand, Amigos, which operates in a few African markets.
Financial details of the transaction were not disclosed, but GCPL chairman Adi Godrej says it was a fairly big deal. "Darling is a popular brand and the firm is one of the largest hair care companies in Africa. I am not in a position to disclose either the financials of the firm or the size of the deal," he said when contacted.
But sources within the company say the deal is in excess of Rs 500 crore. Godrej chose neither to confirm nor to deny this. The transaction, he said, would be funded through a mix of internal accruals and debt. "But debt would be a significant component," he said.
| GCPL’S INTERNATIONAL ACQUISITIONS IN LAST FIVE YEARS | ||
| Year | Company | Area of operation |
| 2005 | Keyline Brands, UK | cosmetics & toiletries |
| 2006 | Rapidol, South Africa | hair colour |
| 2008 | Kinky, South Africa | hair extensions |
| 2010 | Tura, Nigeria (in March) | personal care |
| Megasari Makmur, Indonesia (in April) | household products | |
| Issue, Latin America (in May) | hair colour | |
| Argencos, Argentina (in June) | hair care | |
| 2011 | Darling Holdings, Africa | hair extensions |
GCPL will acquire Darling in three phases. "In the first phase we will acquire 51 per cent stake. But in terms of markets not all will be acquired at the same time. We will add a few markets in the first phase. Once this is completed, the second phase will be triggered in a year. This phase will see addition of a few more markets, while the remainder will be added in the third and final phase, which will be triggered a year after the second," Godrej said.
GCPL will also have the right to increase its stake to 100 per cent after the completion of the first phase, Godrej said.
A key reason for the staggered approach to the transaction, says Vivek Gambhir, chief strategy officer, Godrej Industries, is to facilitate better integration. "Darling is a pan-African company. Every market has a separate team leading it. To facilitate better coordination and integration, we felt a phased approach would be better," he said.
The Darling acquisition will be GCPL's eighth international buyout in six years. The firm began with Keyline Brands in the UK in 2005, following it up with Rapidol and Kinky in South Africa in 2006 and 2008, respectively. Last year saw GCPL make four quick buys including Tura in Nigeria in March, then Megasari Makmur in Indonesia in April, followed by Issue and Argencos in Latin America in May and June, respectively.
The Darling acquisition, in particular, will help GCPL tap into the $1-billion hair extensions market in Africa, which is growing at 15 per cent per annum, according to analysts. "It is a large segment, which is unorganised," said Gambhir. "There is no multinational presence there, so that gives us scope to grow."
GCPL already has a presence in hair extensions through Kinky, which will be integrated with the newly-acquired Darling. "The Rapidol business, which is mainly into ethnic hair colour, will not be integrated into the combine, " said Godrej.
GCPL shares closed the day at Rs 420-0.60 per cent up on the Bombay Stock Exchange. The stock spurted following the announcement of the Darling acquisition in the morning on Wednesday to touch Rs 428.3, which was also the day's high
