Ponds Merger With Levers Imminent: Hg Asia

The courts have stayed the proposed preferential allotment to Unilever, and so the merger has not been possible in the last one year.

The court ruling also stayed the 1:1 bonus issue that was announced. "But the eventuality of a merger (with HLL) cannot be ignored," the report states.

According to the report, the merger of Pond's would benefit HLL because, the product portfolio of Pond's is such that the company does not require to make large capital investments to grow.

Margins in the personal products business are superior to those in the high volume low margin soaps, detergents and tea businesses.

 

With the quantum of investments that HLL has lined up (mainly in the foods business), it could use additional resources and it is here that the cash-rich Pond's will come handy. Besides, operating level synergies will reduce fixed overheads in the long run.

The report which speaks about the Unilever companies in India says the merger of HLL with Brooke Bond Lipton has given shareholders of the merged entity the benefit of the established and non-cyclical businesses of soaps, detergents and personal care, and they could also gain from the new high growth investment in processed foods, ice-creams and exports.