Danone to sell Britannia stake to the Wadias

Written by Corporate Bureau | Mumbai | Updated: Apr 7 2009, 06:30am hrs
In a strategic move, Frances Groupe Danone SA will sell its entire 25.48% stake in Britannia Industries Ltd to the Wadia Group, giving the erstwhile Indian partner a majority holding in the biscuit maker. Analysts said the development sets the stage for a possible direct entry into India by Danone, known for its baby nutrition and fresh dairy products across the globe.

Danone will sell its indirect stake in Britannia to Leila Lands Ltd (Mauritius), a wholly owned subsidiary of Bombay Burmah, which is owned by the Wadia Group, stock exchanges were told on Monday. The proposed deal is expected to go through on April 14 at a price to be finalised later that would not exceed 25% of the price worked under the countrys takeover regulations, Leila Lands said in its filing. The Wadias will have a 50.96% holding in Britannia following the Danone stake sale.

Some analysts said the final price of Danones stake sale could be around Rs 890 crore based on the shares price on Monday. Britannia shares rose 2.93% on the Bombay Stock Exchange to close at Rs 1,468. Analysts also said it is unlikely that the transaction would lead to an open offer since the transfer of shares is between the two promoters. As of December 2008, promoters held 50.96% in Britannia, financial institutions 29.99% and others, 19.06%.

When contacted, a spokesperson for the Wadia Group said: Leila Lands Ltd has sent a notice to the stock exchanges, which is required according to the law and Sebi rules for the group to acquire Danones share. The transfer will only be finalised on the 14th. Secondly, the notice is already clear that it is an inter se transfer between the qualified promoters under Sebi rules.

While Danone officials were not available for comment, industry analysts predict that the company will now focus on negotiating a favourable deal with Britannia over the next few days. According to them, the agreement could end a raging dispute between Danone and the Wadias over the French food companys plans to launch its products on its own in the Indian market.

Finally, the silent war between Danone and Britannia will come to an end. For over two years, Danone and Britannia have been quietly fighting it out. Theres a clear indication that Danone will venture into India soon, said an analyst based in Mumbai.

The deal will also resolve a long-running tussle over the intellectual property rights of Britannias Tiger brand of biscuits. The Tiger brand was developed in India by Britannia and the Wadias claim that Danone used the brand in some 70 countries and wants to be compensated.

According to industry analysts, Danone will directly compete with many brands in the Britannia stable if it enters India with or without strategic partners. Danone is also dominant worldwide in several segments that Nestle has a strong presence in, especially in India.