After acquiring 14.9-% in Henkel, Jyothy eyes more

Mid-sized fast moving consumer goods company Jyothy Laboratories Ltd, which has a history of getting backing from private equity investors such as Baring Private Equity Partners and Actis, has acquired a 14.9-per cent stake in Henkel India Ltd, the Indian listed arm of German consumer goods company that sells products across the personal care, laundry and home care segments, for Rs60.73 crore.

With this, Jyothy has become the single largest Indian shareholder in Henkel India.

Jyothy, which acquired the stake held by Tamil Nadu Petro Products Ltd, a listed company of Muthiah Group, is now also seeking to bid for the 50.9-per cent stake held by Henkel AG that is expected to come up for bidding, rather than a direct negotiated deal. At the same transaction price, a bidder would have to pay Rs207 crore ($46 million) for the majority stake.

Jyothy, which makes the fabric whitener brand Ujala, acquired a large chunk of around 16-per cent stake held by the original Indian partner of Henkel in a cash deal at Rs35 per share, a 22-per cent discount to the closing price of the Henkel India scrip at BSE on Wednesday. 

While Jyothy's shares have slipped after the announcement, those of Henkel are soaring, probably due to the probability that there will be aggressive bidding for Henkel's stake that could push up share price, and thereby the price of a mandatory open offer in the future could be much higher.

Henkel India markets and sells brands such as Henko and White in detergents, dish-wash brand Pril, Fa deodorants, Neem Active toothpaste, and Margo bathing soaps. Reportedly, the German parent was not satisfied with the performance of the Indian arm, which has been making losses for at least the last four years.
 
The company clocked a consolidated net loss of around Rs50-70 crore for each of last four calendar years.