Zydus Cadila all set to acquire Kraft Heinz portfolio for INR 4600 crore
Published Date | 2018 October 24
Zydus is acquiring the portfolio of Kraft Heinz including the children milk drink Complan which will boost the growth of pharmaceutical as well as consumer goods industry.India: Zydus Cadila Group is ready to acquire Kraft Heinz’s consumer brand business in India which also includes the brand of children’s milk drink Complan. The acquisition is worth INR 4500-4600 crore. Cadila is expected to rope in partner of private equity for financial support. According to news, it has sent out feelers to various PE groups like Temasek, True North, Carlyle, and Warburg Pincus in order to partner with them and it also might place its equity in a back-to-back deal. Cadila might have also reached out for funding to some of the financial institutions and domestic banks. This acquisition is expected to have a positive impact on consumer goods and pharmaceutical industries. Zydus Cadila is the frontrunner for the India portfolio of Kraft Heinz. Zydus Cadila is the fourth largest pharmaceutical company in India with sales of INR 11,600 crore during the financial year of 2018. Kraft Heinz surprisingly decided during September that it will sell the European holding Company which looked after the operations in India and wanted that the buyer will also absorb the tax losses of the entity, which is registered in Italy. The original plan of Heinz was to only sell the operations and brands of India. The company in Italy is held by a part of the US parent which is registered in Netherland. Coca-Cola which was formerly pursuing the transaction and was also the top contender had made an offer for the entity in Europe, while Zydus Cadila had only bid for the operations in India but the bid was higher by 10-15 % than Coke. According to BlueWeave Consulting, the business of Kraft Heinz in India comprises of Complan, Nycil which is a talcum powder, Glucon-D, and Sampriti Ghee. The brands made INR 1200 crore approximately in sales, which was led by Glucon-D and Complan. Potential buyers like Danone, Tata Group, Dabur, ITC, Nestle and Wipro Consumer deterred from buying the company due to steep valuations and a diversified portfolio. Kraft Heinz was seeking around $ 1 billion for the company’s assets but most of the bidders hesitated regarding the valuations since the growth prospects were lower. Kraft Heinz will add to the existing portfolio offerings of skin and personal care, health foods and sugar substitutes for the Ahmedabad based Zydus Wellness. The business which accounts for 4% of the total revenue of Zydus Cadila Group grew to 7% in the financial year of 2018. The three main brands which registered faster growth in spite of challenges like the rolling out of Goods and Service Tax. With the swiftly changing preferences for beverages by consumers and the favoring of low-sugar or juice drinks, dairy-based beverages, flavored water and tea, food and cola companies like Coke and PepsiCo or over-the-counter pharma players like Zydus Cadila are continuously changing and developing their portfolio expansion apart from their core brands. The legal advisors for the deal are Avendus and JP Morgan. Thus, the acquisition is expected to boost the business of Zydus and increase the revenue of the company. This, in turn, will accelerate the growth of consumer goods and pharmaceutical industries.