Mumbai: Godrej Consumer Products Ltd (GCPL) has acquired a 51% stake in South African hair care firm Darling Group Holdings for an undisclosed amount, and holds an option to buy out the entire company in five years.
GCPL expects the acquisition, its fourth in South Africa in as many years, to add to its earnings from the first year itself, Vivek Gambhir, chief strategy officer at Godrej group, said on Wednesday.
The company will borrow from banks to fund the acquisition, Gambhir said, without specifying how much debt it will raise or the percentage of the deal amount that will be financed with the borrowings.
“We have just signed the term sheet now and these details will be worked out in the next two-three months,” he said.
Investec SA advised GCPL on the transaction.
The South African company’s brands Darling and Amigos are available in 14 countries. “The Darling Group enables us to take our presence in Africa to the next level,” said GCPL chairman Adi Godrej, who aspires to reach at least 100 million consumers in Africa in five years.
With a population exceeding one billion and economic growth projected at about 6% over 10 years, Africa represents the next frontier of consumption outside the Bric countries—Brazil, Russia, India and China—and Indonesia.
Over the past four years, GCPL has acquired three companies in South Africa including personal care brands Rapidol, Kinky and Tura. Indonesia is currently the largest contributor to GCPL’s overseas revenue at 55%, followed by Latin America at 16%, South Africa at 15% and the UK at 14%. International operations contribute 33% to the company’s overall revenue.
On completion of the Darling Group acquisition, South Africa will become the company’s largest overseas operation, said Gambhir.
Darling Group will be integrated with GCPL in 24 months in three phases. Its existing management team will continue running the business but GCPL will put in place a team comprising executives from both the companies.
Since April 2010, GCPL has made seven acquisitions in India and abroad and its international revenue has grown threefold. But analysts are sceptical. “It’s too early to say how the past acquisitions will turn out. It would take two-three years to understand,” said an analyst at a brokerage that tracks GCPL.
Shares of GCPL inched up 0.60% to end Wednesday at Rs 420 on the Bombay Stock Exchange, keeping pace with the Sensex’s 0.57% rise.