Sodexo tops menu with Rs 400-cr buyout

Written by Corporate Bureau | New Delhi | Updated: Mar 12 2009, 03:21am hrs
French global food & facilities management company Sodexo has taken over Indias largest food & support services company, Radhakrishna Hospitality Services (RKHS), in an all-cash deal worth more than Rs 400 crore.

The deal was clinched after RKHSs attempts to rope in financial investors failed to materialise due to differences over pricing. The deal, however, does not include RKHSs other businesses, including its retail arm or logistics & supply chain. The new entity will function under Sodexos ownership.

RKHS promoter Raju Shetty will be non-executive chairman of the combined entity, sources said. The Sodexo group has two subsidiaries in India. Its range of services is clubbed under food & facilities management services that maintain institutions, while the other provides service vouchers and card services.

The company rolled out its India operations in 1997 and became a Rs 1,000-crore entity last year. The global turnover of its business is $13.6 billion. Sodexos market cap is estimated to be $18-20 billion.

RKHS was already the number one player in the Indian food services market and the joint entity would now have a clear edge over all rivals, besides providing RKHS an opportunity to re-enter the international market where it earlier used to operate, the source said.

The Indian food & facility services industry is growing at around 40% a year and is expected to sustain this growth. The relatively unorganised industry is an attractive target for acquisitions and has drawn the attention of several overseas companies. The $12.4-billion Aramark Corporation of the US is also eyeing buyouts here

In the last financial year, RKHS had revenues of Rs 400 crore, and in the current fiscal, its top line is expected to be around Rs 450 crore. Industry sources said RKHS, which has been experiencing top line growth of 30% in the last couple of years, will not only give the French food major a foothold in India, but also a clear leadership position.

The deal was brokered by Delhi-based BMR Advisors who acted as the sole transaction advisors. Neither company could be contacted for comment, but a formal announcement is expected later. Last year, RKHS purchased a stake owned by Compass, a US food service firm, in a joint venture and is in the process of rolling out its international catering services.