Indian food company LT Foods has entered into an agreement to acquire rice export business of consumer goods producer Hindustan Unilever (HUL) for around Rs250m ($3.76m).
Under the deal, LT Foods will acquire two HUL brands - Gold Seal Indus Valley and Rozana.
The takeover is intended to strengthen LT Foods' position in the Middle East by helping it gain entry into Qatar, Oman and Bahrain, while also strengthening its presence across Saudi Arabia, Kuwait and UAE.
LT Foods will fund the acquisition through debt and internal accruals.
Following the completion of certain closing adjustments and competition authorities' approval, the deal will be completed. Both the companies intend to complete the process within the next few months.
HUL will continue to manage the business until the completion of the deal.
HUL CEO and marketing director Sanjiv Mehta said: "Over the years, Gold Seal Indus Valley and Rozana have become household names in the Rice category across the overseas markets in which they operate.
"The brands enjoy strong equity and have been delighting consumers through a range of high quality offerings in Basmati Rice.
"Given the context of our portfolio priorities, we believe that it is in the best interest of the business to sell these brands to a strategic player such as LT Foods, who is capable and well positioned to unlock their full potential."
HUL had begun Basmati rice exporting business in 1985 under the 'Gold Seal Indus Valley' brand to several countries in the Middle East and Europe.
The business grew to operate across 21 countries and its current portfolio includes Brand Gold Seal Indus Valley Basmati Rice operating in Premium segment & Rozana Branded Basmati Rice operating in mid segment.
LT Foods managing director V.K. Arora said: "The Middle East has the largest basmati rice consuming population. It accounts for almost 80% of the total basmati consumption in the world. This region being critical market and our limited presence with only 15% of our total revenue coming from the geography is now getting addressed by this acquisition.
"This acquisition will help us penetrate and establish in countries like Oman, Qatar, and Bahrain where we have no presence. It will broaden our basket of offerings of brands with a high recall value.
"We can leverage the distribution networks of the brands acquired in the relevant market, while gain from the synergies of the supply chain management and back-end processing. These synergies will give us an improved margin profile. We could target to triple the current annual turnover of these brands in 24-30 months timeframe."
Image: LT Foods to acquire Basmati rice brands of HUL. Photo: Courtesy of winnond/FreeDigitalPhotos.net.
