GCPL makes 2nd acquisition this year

Business Standard, Business Standard, 02 April 2016

The consumer arm of the $2.25-billion (Rs 13,500 crore) Godrej Group has made its second acquisition this calendar year in US-based Strength of Nature (SON).

Godrej Consumer Products (GCPL), whose consolidated FY15 revenues were Rs 8,242 crore, announced on Friday it had entered into an agreement to acquire SON, which is into hair care products for women of African descent. While the deal size was not disclosed, GCPL said SON's CY15 revenues were $95 million (Rs 635 crore).

Analysts peg the deal size at Rs 1,200-1,300 crore given the metric of two times sales, which is common in deals involving consumer goods companies.

Adi Godrej, chairman of Godrej Group, stated, "Over the past few years, we've been scaling up our international presence with acquisitions that fit well in our 3-by-3 strategy (a presence in emerging markets in Asia, Africa and Latin America through three core categories - hair care, home care and personal care). These strategic acquisitions have strongly aided our growth story. Through them, we have extended our core businesses and implicitly broadened our presence to a wider canvas."

Earlier this year, GCPL had acquired Kenya-based Canon Chemicals, a home and personal care company. While the transaction was small, it helped cement GCPL's position in Sub-Saharan Africa, a key region for the firm.

Company executives say the SON buy is slightly different from African acquisitions done so far by the firm because SON is not based in the continent. Instead, the attempt had been to cast a wider net and look at companies that target all women of African descent, company sources said, irrespective of where it was based.

"Strength of Nature has a strong track record of serving consumers across Africa and the US through its robust portfolio of heritage, category leading brands. We look forward to leveraging its strong brand equity for our business," said Vivek Gambhir, managing director of GCPL.

GCPL is expected to step up the pace of acquisitions this year after a brief lull over the past few years.

"The timing is right, again. In the past two to three years, we were a little slow on acquisitions, having done a slew of them between 2010 and 2013. But now, the integration of all the acquisitions in the first phase has gone quite well, I think we can move into second gear on the inorganic (growth) front," Gambhir had said in an earlier conversation with Business Standard.