February 12: Hindustan Lever has decided to buy out the cosmetics business of the Tatas-controlled Lakme Ltd lock, stock and barrel. The sellout has been necessitated, the Tatas say, because the incremental investment required is much more than originally envisaged.It could not immediately be ascertained as to what line of business Lakme Ltd would pursue hereafter, but it appears its focus would be on a new retail business, for which the company has already signed up a joint venture with Littlewoods.
Hindustan Lever is buying out the 50 per cent stake of Tatas in its joint venture for cosmetics, Lakme Levers Ltd. It is also buying Lakme trade marks from Lakme Ltd's wholly-owned subsidiary, Lakme Brands. The combined consideration for these is Rs 200 crore.
Separately, Levers will also buy out the entire manufacturing facilities of Lakme Ltd at Deonar in Mumbai and Kandla in Gujarat, for a fair value to be decided upon by an independent valuer. This gross amount would be reduced in the hands of Lakme tothe extent of tax and repayment of existing debts of Lakme Brands.
The cash outflow for purchase of the Lakme Brands and the Tata shares in Lakme Levers will actually be much less, Rs 130 crore, because Lakme Brands is expected to redeem, from the sale of Lakme trade marks, optionally convertible debentures worth Rs 70 crore held by Hindustan Levers.
The offer for purchase was made to the Tatas last month. The Lakme Ltd board, in agreeing to the offer, took into consideration "the increasing intensity of international and domestic competition and the need to keep on making further substantial investments in brand building, new product development and launches".
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
