Zydus agrees to pay $628mn for some Kraft Heinz India brands

Bloomberg

Zydus Wellness Ltd., with parent Cadila Healthcare Ltd., agreed to pay 46 billion rupees ($628 million) 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 Pvt., Zydus said in a statement on Wednesday. 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.
Zydus was advised by Avendus Capital and Khaitan & Co. J.P. Morgan Securities LLC served as the financial adviser to Kraft Heinz, while India-based Cyril Amarchand Mangaldas and global law firm Gibson, Dunn & Crutcher served as legal advisers.
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 H.J. 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 percent in the 2017-2022 period, after growing at a 16.1 percent pace during 2012-2017, according to Euromonitor. Growth in malt-based hot drinks is also slowing. 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. Both Complan and Horlicks are facing stiff competition from alternatives such as drinks with added protein and mixing syrups such as chocolate or vanilla.

At the same time, rising health awareness in India is driving demand for Ayurveda-based products.
“Ayurveda-based pharmaceutical companies, including Baidyanath and Dabur, are planning to enter this category as demand for Ayurveda-based products is rising,” said Devchandan Mallick, research analyst for drinks and tobacco at Euromonitor International. “Existing players are also expected to revamp their product portfolios in line with changing consumer preferences and demands.”