Godrej Consumer Products Ltd buys Issue Group of Argentina

A homegrown, hair-colour multinational?

Quite.

Godrej Consumer Products Ltd (GCPL), the toilet soaps major, on Sunday evening said it is buying out the Issue Group of Argentina for an undisclosed amount, making an entry into the hair colourants markets of Latin America.

This will be the company’s sixth acquisition in 3 years, making it a true multinational with presence in Asia, Africa and Latin America.

The companies bought include Laboratoria Cuenca and Consell SA of Argentina, Issue Uruguay and Issue Brazil.

Godrej did not divulge financial details citing confidentiality agreements but said the valuation was 8 times Issue’s Ebidta.

The acquisition will be earnings per share accretive in the first year of operations, Godrej said in a statement. Elara Capital advised Godrej on the transaction.

The Issue Group is a major player in the Latin American mass segment hair colour market. It has a 20% market share in Argentina and is and a leader in Peru, Uruguay and Paraguay.

The company also has an emerging presence in Brazil, where Godrej is looking to expand.

The Issue Group had revenues of over $33 million in 2009. GCPL will have full control by early-June. “This is a very strategic acquisition for us, which will mark our entry into Latin America and will give us the opportunity to do business in other parts of the continent. There will be a lot of potential to exchange technology, cost savings and R&D between our Indian and Latin American operations,” Adi Godrej, chairman, Godrej Group, told DNA on Sunday.

“I think it will create tremendous shareholder value because it will be highly accretive.  In this very year, our consolidated profit after tax (PAT) will be considerably increased as a result of this acquisition,” he said.

The hair colourants market in Argentina is estimated to be around $200 million growing at a CAGR of more than 22% over the last two years.

This is Godrej’s third strategic acquisition in a year apart from the takeover of the remaining stakes in Godrej Sara Lee recently.

The player is going to gain control of the 51% shareholding in Godrej-Sara Lee, which was a joint venture between the Godrej Group and US-based Sara Lee Corp, by end of the next week.

The company in March acquired Nigerian personal care company Tura to strengthen its pan-African presence in personal wash and skin care. Then in April GCPL announced an acquisition agreement with Indonesian firm Megasari Magmur Group.

While the completion of Megasari’s acquisition was announced last week, Tura’s is likely to take time till end of June.

Megasari manufactures and distributes products like household insecticides, wet tissues and air fresheners that is alike in business to Godrej subsidiary Godrej Sara Lee that sells household and insecticide products like Hit and Good Knight.

In 2009, Megasari posted revenues of $120 million, showing a 20% year-on-year growth.

Godrej completed the full control of Megasari’s takeover last week, and is looking to add about 25% to its consolidated revenues from this deal.

Two and a half years ago, Godrej had acquired two South African ethnic hair care brands Rapidol and Kinky. But the company continues to remain hungry for more acquisitions both in India and overseas.

“So long as it is very strategic and accretive, we will look for more acquisitions,” Adi Godrej said.

“We would look at acquisitions in India, where we could be more broad-based on brands in personal care and household care. In India, we would not only be focused on hair colours or household insecticide and soaps but we could look at other categories,” he said.

Internationally, GCPL continues to scout Asia, Africa and Latin America for acquisitions in fields of hair colourants, soaps and household insecticide. Industry sources believe the company is in talks with Brazil’s hair colour major Embelleze for an acquisition.

Godrej said that the company is anticipating the recent acquisitions to boost profits strongly.

“There will be very strong growth, we expect our sales turnover this financial year to be around Rs 4,000 crore. Our growth rate both on sales and profits will be very high because of the accretive nature of the acquisitions and so we see a very strong year ahead and in the following year we will get a lot of synergistic benefits from all the acquisitions,” he said.

The company had last year received a nod from its board to raise Rs 3,000 crore through debt and equity during May and June to fund acquisitions.