Private equity major IL&FS Investment Managers (IL&FS) has offered around $35 million or Rs 175 crore to buy out US chocolate confectionery major The Hershey Company’s 51% stake in its Indian joint venture (JV) with the Godrej Group.
The Godrej Group would continue to hold the remaining 49% in the company, which will go back to its original name, Godrej Beverages & Foods. The Godrej Group will go back to managing the business as it did prior to forging the JV with Hershey’s.
TOI has learnt from sources that after the exit of Hershey’s, the Godrej Group is likely to forge another joint venture with a foods multinational. These talks are, however, in the exploratory stage.
According to sources in the know, an offer was recently made by IL&FS to Hershey’s, which is expected to come back on its approval soon. Sources said that although the joint venture is valued at Rs 350 crore, the amount quoted by IL&FS for the Hershey stake is much lower than what Hershey’s had paid to the PE firm in 2007 to gain an entry into India – over Rs 250 crore.
A Mahendran, who is director on the board of Godrej Hershey , was not available for comments , while The Hershey Company could not be reached.
Hershey’s is expected to go it alone in India, and is said to be keen on pushing its products to consumers here. The only product from the American chocolate maker’s stable which has so far been launched by the JV in India is the chocolate syrup.
While talks are in the early stages, the Godrej Group is understood to be in discussions with a few food multinationals who are keen on entering India. As and when this happens, IL&FS would exit the company.
Cultural issues appear to have resulted in a break-up between Godrej and Hershey. The JV operated in multiple categories such as confectionery , beverages and grocery products. Brands like Mahalacto , Nutrine, Jumpin and Sofit were part of the product portfolio. Prior to Hershey’s , the Godrej Group had a tie-up with Pillsbury, which was called off in 2001.
Among other joint ventures which have not lasted for the Godrej group include the one with US personal care giant, Procter &Gamble, which ended in a bitter break-up around 1995. The only JV of the group which has lasted for 15 long years was with Sara Lee Corp.
Besides being a platform for MNCs marking an entry into India , the Godrej Group has, on its own, expanded its base outside India into Africa, Indonesia, South America and UK, on the back of a well chalked out acquisition strategy.
Source: Times of India