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Wadias, Danone Part Ways; Danone To Go Solo In Dairy, Water

07 April, 2009

France’s Groupe Danone SA has decided to sell its entire stake in Britannia Industries Ltd., giving the Indian biscuit maker’s majority holding to a company belonged to the Wadia group.

Leila Lands Ltd. (Mauritius), in a regulatory filing in India Monday, said it will buy 6.086 million equity shares, representing a 25.48% stake in Britannia Industries, on April 14 from Danone’s U.K. unit Britannia Brands Ltd.

The purchase will double Leila Lands’ stake in Britannia Industries – India’s top biscuit maker by sales – to 50.96%.

The deal could end a long-standing dispute between Danone and the Wadias of India’s Bombay Dyeing Group over the French food company’s plans to launch its products on its own in the Indian market, said analysts.

Under a 1995 contract, Danone had agreed not to launch any food brands in India without the Wadia family’s consent.

The sale could also resolve the tussle over the intellectual property rights of the Indian company’s Tiger brand of biscuits. Britannia Industries claims Danone sells the biscuits in other markets and demands compensation from the French company.

“This is a positive development for Britannia as the issue had been dragging on for some time,” said Anand Shah, an analyst at Mumbai-based Angel Broking. Also, “a resolution means the Britannia management will now have a free hand to go ahead with its strategic plans,” he added.

“However, it still needs to be seen as to what the Wadias have paid to buy out Danone’s stake and what are the other contours of the settlement.”

Though the notice from Leila Lands didn’t disclose financial details, media reports earlier had said the Wadias were looking to buy the stake at a discount.

At Friday’s closing price of INR1,426.25, Danone’s stake in Britannia is valued at INR8.69 billion ($173 million). The shares gained 2.9% to close at INR1,468 Monday on the Bombay Stock Exchange, whose benchmark index rose 1.8%.

The French dairy and beverage giant and Wadia group each own half of Associated Biscuits International Ltd., which holds 50.96% of Britannia Industries, giving each partners control of 25.48% of the biscuit maker.

Britannia Industries declined to comment on the issue, while Danone couldn’t be reached.

Bombay Dyeing, in an emailed statement, said, “The notice is already clear that it is an inter-se transfer between the qualified promoters,” under the rules of stock market regulator Securities and Exchange Board of India.

This is the end of three-year old dispute between Nusli Wadia-owned Indian biscuit maker Britannia Industries Ltd and France’s Groupe Danone. The latter will sell its 25.48% stake in the company to Leila Lands Ltd (Mauritius), a 100% owned arm of the Wadias.

The transaction is valued at about $200 million, and is expected to be completed by April 14. Leila Lands said in a statement to Bombay Stock Exchange that it will buy 6.086 million equity shares representing a 25.48% stake in Britannia Industries from Danone’s U.K. unit Britannia Brands Ltd.

This deal will give Wadias control over the biscuit maker. Wadias will now own 50.96% stake in Britannia through Leila Lands, which is a 100% subsidiary of Wadia’s Burmah Trading Company. Danone will now be free to pursue its own independent course of business in India.

Earlier, Donone’s investment in Avesthagen, a Bangalore-based biotech company, was opposed by the Wadias saying it violated the Press note 18. Subsequently, Danone registered the trademark of Tiger brand ( a biscuit brand owned by Britannia) in more than 70 countries, which was opposed by the Wadias. The dispute has been going on for a while, which has come to an end with the exit of Danone from Britannia.

The transaction values Britannia at about Rs 4,000 crore, a premium of about Rs 500 crore over  Monday’s market cap of Rs 3,500 crore.

The Economic Times reported on Tuesday that the Wadias have raised a debt of $200 million from ICICI Bank to acquire Danone’s stake.

Globally, Danone had earlier sold its biscuit business to Kraft Foods. It only had its interest in Britannia. After this exit, Danone will be pursuing only its water and dairy business. Danone is setting up their water and dairy business in India.


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Wadias, Danone Part Ways; Danone To Go Solo In Dairy, Water

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