GCPL said it has entered into an agreement to acquire the entire stake of the promoters in Laboratoria Cuenca, Consell SA, Issue Uruguay and Issue Brazil, which is collectively referred to as the Issue Group. TOI reported in its edition dated April 19, 2010, GCPL's move to buy out the Issue Group from its founders, Roberto Hlace and Oscar Villalba.
In a press release announcing the acquisition, GCPL said the Issue brand enjoys volume leadership in Argentina with a market share of over 20%. A closely held group, Issue posted revenues in excess of $33 million in 2009. Though the cost of acquisition was not disclosed, Godrej group chairman Adi Godrej said it was eight times the EBIDTA (earnings before interest, depreciation, taxation and amortisation). The acquisition is expected to be earnings accretive in the first year of operations.
"We will raise more equity so as to maintain our debt-equity ratio, which is currently around 1:1." Godrej said. Industry observers pegged the cost of acquisition in the range of $50-60 million (Rs 250-300 crore). Issue Group enjoys a strong leadership position in the Argentine hair colour market and dominates the mass segment. It is also the market leader in hair colours in Peru, Uruguay and Paraguay and has an emerging presence in Brazil.
"The Issue group provides us the perfect platform for establishing a strong presence in the fast-growing hair colour markets in Latin America. Argentina and Brazil are leading vanguards of hair trends and innovations in haircare. We also hope to use the strengths of the offerings of the company and our own innovation funnel to create a sizeable business in hair colours in Brazil," said Godrej.
"We will be leaders in hair colour market in 19 countries, which include five markets in Asia, 10 in Africa and four in Latin America," said Godrej. "The acquisition is in line with GCPL becoming a leading emerging markets multinational and dovetails well with our global 3 by 3 strategy - presence in three continents - Asia, Africa and Latin America through three core categories - home care, personal wash and hair care. A Mahendran, director, FMCG Portfolio Cell, said: "We continue to stay true to our battle-tested approach of acquiring pioneering local brands with strong leadership positions in attractive geographies that have demonstrated an excellent track record of results and are run by seasoned management teams."
The hair colorants market in Argentina is estimated to be around $200 million.
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