Zydus to pay RM2.6b for some Kraft Heinz India brands

By BLOOMBERG

MUMBAI • Zydus Wellness Ltd, with parent Cadila Healthcare Ltd, agreed to pay 46 billion rupees (RM2.61 billion) to acquire some Kraft Heinz Co businesses in India to strengthen their presence in the world’s fastest-growing major economy.

Zydus will gain control of nutrition drink Complan, instant-energy drink Glucon-D, talcum powder brand Nycil and ghee brand Sampriti from the acquisition of Heinz India Pte Ltd, Zydus said in a statement yesterday.

Zydus will use a mix of debt and equity to fund the transaction and “select leading private equity firms have committed to partnering the transaction by way of equity support”, it said in the exchange statement.

The deal gives Zydus access to the top brands in the supplement nutrition drinks market estimated by Euromonitor International to be worth 17 billion rupees last year.

Greater awareness is encouraging more young Indians to prefer healthier options to carbonated drinks and that’s in turn leading to intensifying competition in the segment.

“Malted beverages are growing more than dark carbonated drinks,” said Santosh Kanekar, founder at consultancy BeLive Corp. “India has always been an outlier and despite being a tropical country of this size, sales of hot drinks like tea, coffee and malted beverages surpass that of cold drinks.”

Zydus was advised by Avendus Capital and Khaitan & Co. JP Morgan Securities LLC served as the financial advisor to Kraft Heinz, while Indiabased Cyril Amarchand Mangaldas and global law firm Gibson, Dunn & Crutcher served as legal advisors.

Revenues of the four brands for the 12 months ended June 30 were approximately 11.50 billion rupees, Ahmedabad-based Zydus said in the statement.

The acquisition is expected to be completed by early 2019. Zydus will get global rights for Glucon-D, Nycil and Sampriti. It will acquire rights for India, Bangladesh, Nepal and countries where the seller has intellectual property rights for Complan.

The Indian affiliate of Kraft Heinz started operations in 1994, under HJ Heinz Co. It has two manufacturing facilities in Aligarh and Sitarganj, both in northern India, and employs about 2,500 people, according to the company’s website.

Zydus is entering a slowing nutrition drinks market. The segment is estimated to expand at a compound annual growth rate of 5.6% in the 2017-2022 period, after growing at a 16.1% pace during 2012-2017, according to Euromonitor.

Growth in malt-based hot drinks is also slowing. The market, valued at 78.7 billion rupees, is estimated to slow to a 3.7% pace in the 2017-2022 period from 11.5% in 2012-2017.

The leader in this segment, Horlicks, is also up for sale. GlaxoSmithKline plc has requested bids for its Indian consumer- health unit, which owns Horlicks, according to people with knowledge of the matter.