This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Global billion-dollar multinational corporations engaged in personal care and consumer segments are scanning Indian nutraceutical players for bolt-on acquisitions, multiple sources told mergermarket. Early last year L’Oreal’s chief executive Jean-Paul Agon confirmed that L’Oreal was keen to acquire an Indian ayurvedic (Indian herbal solution in nutraceuticals) company, which could at best make up for not more than 5% of the business’ future sales growth in India.
Last week this news service interviewed consumer and personal care companies on the sidelines of a nutraceutical conference in Mumbai. A Coca-Cola source said the company is quite keen to look at relatively small acquisition targets that have expertise in nutraceuticals. The Coke source said this could be well in line with the company’s overall plan to increase its presence in the nutraceutical beverages market. The source declined to name potential targets in the Indian market, while adding he was aware that there are scores of companies engaged in the nutraceutical space involved in approved products, over-the-counter dietary supplements and research & development, all of which could enthuse Atlanta-based Coke. The USD 140bn market cap Coke recently took a 40% interest in organic beverages maker Honest Tea.
Europe-based multinationals such as Nestle and Danone have taken an interest in neutraceuticals and functional products in the past years, a Europe-based sector banker said. In developed markets, functional additions pave the way to develop premium products, for example by adding vitamins to foods. However, in Asia, targets outside of foods are more likely to be smaller bolt-ons or joint ventures, which would enable multinationals to tap into local technologies, he explained.
A source at Michigan-based direct selling giant Amway confirmed that the company’s Indian unit - Amway India - also will not shy away from an opportunity to acquire a nutraceutical or biopharma research company. The source said Amway invests lots of capital in its food products category to make it as functional as possible. The category has already been proven for its nutritional value. The Amway source agreed that there are several Indian companies that are doing substantial work in bioinformatics and R&D on nutraceuticals, even ones that have patent rights, which could be potential targets for Amway. Alticor, which owns Amway, saw its global sales for 2007 top USD 7bn.
A source at Chennai-based EID Parry said the company would be quite open to discussing strategic stake options with large MNCs abroad, since a deal of that sort would help the Indian business to scale up its operations in the global marketplace. EID would not sell a controlling shareholding in the company, however, options for a minority stake could be considered, the source said. Listed EID had 2007 sales worth USD 700m.
A fortnight ago, EID Parry acquired a smaller local nutraceutical peer for an undisclosed sum. Its main interest was in the target’s expertise in algae-based extracts. The target company - Phytoremedies Biolabs - manufactures speciality ingredients; vitamin health supplements, such as tomato lycopene for the nutritional, food and pharmaceutical industries. The EID Parry source’s comments were made in response to a query on whether the company would listen to an approach from Korean natural gas supplier Seoul City Gas for a strategic stake sale.
According to a recent report by this news service, the Korean natural gas company, with a USD 455m market cap, recently realized that the Indian nutraceutical/herbal solutions space has enormous opportunities and was keen for a buyout of an Indian nutraceutical player. The Korean company had heard about Indian ace herbal solutions firm, Noida-based Biotique. Biotique is one of the most reputed brands in the Indian nutraceutical business, considering its vast line-up of personal care products and its huge success abroad, with a large pool of global celebrities vouching for that brand, an Indian banker familiar with the sector said. The banker said he had earlier approached Biotique for a potential offer from a bidder, though the company would not entertain such an offer. Biotique executives were unavailable for comment.
A source at Floriana, another Indian nutraceutical player, said he is keen to discuss strategic sale options for its nutraceutical business. Private Floriana Group, which has interests in mining, agri business, personal care products and retailing, is valued at more than USD 500m, the source said. The group is one of the largest players in essential oils, herbal oils, essences and speciality perfumery compounds based on sandalwood oil through three of its group companies. Each company manufactures perfumery compounds & essences and essential oil through its own manufacturing facilities located in Haryana and Tripura.
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