- July 10, 2018 / 5 min readJPMorgan and Lazard are working with Kraft Heinz to find a buyer in a deal valued at about 1 billion multiple sources close to the deal told ET
Bulge-bracket private equity funds such as Blackstone and Carlyle are said to be competing with domestic and international strategic buyers such as Abbott, Emami, Wipro Consumer Care, Zydus Wellness and ITC to buy the consumer food division of the Kraft Heinz Co. in India. Intense competition and slowing growth in the consumer healthcare market has forced large multinational corporations to weigh the options on their existing businesses.
The sale could include the entire consumer healthcare business of Kraft Heinz in India, which includes top-selling brands such as Complan, Glucon-D, Nycil and Sampriti Ghee. The talks are currently at an exploratory stage.
JPMorgan and Lazard are working with Kraft Heinz to find a buyer in a deal valued at about $1 billion, multiple sources close to the deal told ET.
Rival GlaxoSmithKline has also put its consumer healthcare business in India, which includes its largest-selling brand Horlicks, on the block.
Headquartered in Chicago and Pittsburgh, the US firm bought Complan from Glaxo in 1994.
Controlled by Warren Buffett’s Berkshire Hathaway Inc. and private equity firm 3G Capital, Kraft Heinz reported better-than-expected profit in May. Management said it’s still eyeing acquisitions after Unilever NV spurned its takeover bid last year.
Blackstone and Carlyle declined to comment as did spokespersons of Abbott, Wipro and Emami. There was no response to emails sent to Kraft Heinz, Zydus Cadila and ITC.
The decision to sell the consumer business is also part of the merger between Kraft and Heinz in 2015. Controlled by Warren Buffet’s Berkshire Hathaway, Kraft was created two years ago after the merger of Kraft Foods and Heinz. The company has 13 different brands with $500 m or more each in annual sales.
“The level of penetration and per-capita consumption of these FMCG (fast-moving consumer goods) products are comparatively low,” said Harminder Sahni, managing director of retail consultancy firm, Wazir Advisors.
“Hence, the expectation is that these brands will be larger by 50-100 times in next 20 years, causing increased interest from strategic and PE investors.” As incomes rise, consumers will increasingly seek out branded products, boosting demand, he added.
Glaxo launched Complan, a powdered milk energy drink in 1954. Although the Complan brand in the UK was sold to Boots in 1988, it stayed in India with Glaxo until 1994, when it was acquired by Heinz.
Complan has about 8% market share in the Rs 6,000-7,000 crore market for malted food drink in the country. GSK’s Horlicks is the market leader in this segment.
Kraft Heinz India has annual sales of around Rs 1,800 crore and Complan accounted for about 40-45% of this in FY17.
Consumer acquisitions in India have more than doubled this year to $7.7 billion, up from $3.4 billion during the same period in 2017, data compiled by Bloomberg show.
The transaction coinciding with the GSK trade is also expected to see frenetic deal-making.
“Unlike GSK, which is a larger $4.5-billion play, suited for global players, this is smaller in size and hence the interest levels among local players is higher,” said an investment banking official aware of the discussions.
In the malt-based energy drink market, GlaxoSmith-Kline has a majority share through Horlicks, Boost and Maltova. Other contenders are Complan, Nestle’s Milo and Kraft-owned Cadbury’s Bournvita.
Consumer Healthcare has been a favoured theme for private equity funds such as Carlyle and Blackstone. Both have indicated interest in acquiring the spun-off units of global companies and have been aggressively competing for them.
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