Fis May Oppose Lakme Sale To Hindustan Lever

The institutional shareholders in cosmetics major Lakme may vote against the company resolution to sell its business to Hindustan Lever at Lakmes extraordinary general meeting, expected to take place within two months.

According to industry sources, the FIs are unhappy with Lakmes decision to sell its 50 per cent holding in Lakme Lever, as well as Lakmes trademarks which belong to fully-owned subsidiary Lakme Brands to HLL for around Rs 200 crore. The company has also decided to sell its manufacturing facilities to HLL, though the price that Lever will pay for the plants is still being worked out. The employees of Lakmes various manufacturing units will be transferred to Hind Lever.

 

This move will turn Lakme into a shell company and this is not going to benefit shareholders. Since the promoters holding in the company is only around 26 per cent, the management could find it difficult to see the resolution through if the institutions and individual shareholders oppose it, the sources pointed out.

FIs hold around 12.28 per cent in Lakme, while the foreign holding in the company is around 10.37 per cent. Mutual funds hold around 11.35 per cent and the promoters holding is around 25.84 per cent. Others, including the public, hold 47.95 per cent of the companys equity.

The Tata group is learnt to be working out a formula to appease the institutional shareholders. There are talks of the Tatas merging Lakme with Indian Hotels, which would mean the Lakme shareholders would receive Indian Hotels shares in lieu of Lakme shares. Since Indian Hotels is a strong profit-making company, the shareholders returns will be assured, market sources said.

However, an Indian Hotels spokesperson said, There is no truth whatsoever in the rumour that Lakme will be merged with Indian Hotels.