The Hindu : HLL to transfer edible oils business to U.S. firm

Online edition of India's National Newspaper
Saturday, Jun 21, 2003

Business

Business

HLL to transfer edible oils business to U.S. firm

By Our Staff Correspondent

MUMBAI JUNE 20. Hindustan Lever (HLL) has signed a memorandum of understanding with Bunge of the U.S. for transferring its domestic edible oils and fats business in India and Nepal for a consideration of Rs. 90 crores in which HLL will make a profit of around Rs. 60 crores. The HLL board, which met here today, has granted an in-principle approval to the proposed transaction, subject to approval by shareholders.

The edible oils and fats business of HLL registered a business turnover of Rs. 388 crores last year but recorded a loss of Rs. 18 crores. It comprises manufacturing and marketing of Vanaspati (hydrogenated fats), refined oils and bakery fats.

The proposed transfer of business to Bunge which is structured as a slump sale/going concern would include the manufacturing facility at Tiruchi, Tamil Nadu, together with about 300 employees and around ten managers directly relevant to the business with continuity of service and full protection to the existing terms and conditions.

It will also involve assignment of well-known brands such as Dalda and its various extensions — Masterline, Gold Seal, Silver Seal, Marvo, Biskin and Lily in India and Nepal. HLL would continue to distribute the products of the business post-divestment through a distribution arrangement with Bunge for a fee which is yet to be decided. The dealings with stockists and trade will therefore remain unaffected by the proposed transaction.

According to a HLL spokesman, the arrangement with Bunge is similar to the arrangement HLL already enjoys with Kimberley Clark for Kotex, diapers and FemCare products and with S. C. Johnson for Domex and insect care products where it continues to distribute the products after divestment.

HLL would soon seek the approval of its shareholders through a postal ballot for the divestment of its edible oils and fats business and the definitive agreements are expected to be signed in July-August 2003 after the receipt of various approvals by HLL and Bunge.

The divestment of the business is in line with HLL's focussed business strategy and rationalisation of its existing brand portfolio. Value added processed foods will continue to remain a key focus area for HLL growth and it will seek to build and grow its portfolio of products and categories in this market with power brands such as Knorr, Kissan, Annapurna and Becel.

Bunge is a U.S.-based integrated global agribusiness and food company operating in the farm-to-consumer food chain and worldwide distribution capabilities with about $14 billion. It has over 25,000 employees and locations in 29 countries. It is the world's leading oilseed processing company, the largest producer and supplier of fertilizers to farmers in South America and the world's leading seller of bottled vegetable oils to consumers.

The group has a substantial presence in South America, particularly in Brazil and Argentina.

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