Mumbai: Godrej Consumer Products Ltd (GCPL), the maker of Cinthol soaps and Hit insecticides, said on Monday that its UK unit Keyline Brands Ltd had acquired the Soft and Gentle brand from Colgate-Palmolive Co. for an undisclosed sum.
Soft and Gentle’s 2011 sales amounted to £21 million, the company said in a BSE Ltd filing. The company would have paid approximately 50% of the sales value for the purchase, analysts said.
The acquisition is being funded through low-cost debt.
Soft and Gentle is the UK’s fourth largest women’s deodorant brand by market share, according to the company statement. “The acquisition of Soft and Gentle by Keyline Brands will add profitable scale to our UK business,” said Anand Rangaswamy, Keyline Brands managing director. The acquisition is in line with the company’s UK strategy of changing the mix towards owned brands and building more scale in the business, he said. Historically, the company has had a higher proportion of distributed brands than owned ones in the UK.Soft and Gentle was launched in the UK in 1976 as the first “non-sting” anti-perspirant for women.
“We expect this acquisition to be accretive in year one,” GCPL chairman Adi Godrej said in a statement.
The acquisition is a departure from the company’s so-called 3x3 strategy focused on increasing presence in three regions—Asia, Africa and South America—through three core categories: home care, personal wash and hair care, analysts said. GCPL made acquisitions in the past as part of that strategy including Cosmetica Nacional, a Chilean hair colour company, the pan-African Darling Group, the Megasari Group, a maker of household products in Indonesia, and Issue Group and Argencos, two leading hair colorant companies in Argentina. “Keyline is not part of the 3x3 strategy of the company as the business is based in the UK. However, the acquisition follows the same philosophy of becoming accretive in year 1 and the brand having a strong presence,” said Abneesh Roy, associate director, institutional equities–research, Edelweiss Securities Ltd. “It will make the UK business more sustainable as now close to 65% of revenues will come from company-owned brands, up from 35% in the past.” GCPL has been aggressive in making acquisitions. In 2010, the company made some eight acquisitions—and pursued the strategy of inorganic growth in the following two years as well.
“The company is open to looking at any bolt on acquisitions in Africa and Indonesia but is not considering any big-ticket acquisition in the near term. The company believes that the series of acquisitions done over the past few years provides sufficient levers for growth over the near to medium term,” said Amrita Basu, analyst, institutional equities, Kotak Securities Ltd, in a 20 December report after meeting the GCPL management.
Over the last few years, Keyline Brands has grown in a tough market environment that is witnessing little to no growth, said GCPL in its statement. “I am optimistic that our UK business will continue to outperform the market,” said Rangaswamy. Established in the UK in 1990, Keyline was acquired by GCPL in October 2005. Keyline operates in the household and personal care space and its portfolio includes brands such as Cuticura, Aapri, Inecto and Touch of Silver.