Emami to merge Zandu’s FMCG business, hive off realty arm

Kolkata-based Emami Ltd, which acquired a majority stake in Zandu Pharmaceutical Works in October 2008, has decided to merge the fast moving consumer goods business of Zandu into Emami.

At the same time, the real estate business of Emami, which includes Emami Realty Ltd and Emami's interests in Zandu's non-core businesses, including real estate, will be merged into a separate company.

"Simultaneously, the realty undertaking of Emami will be demerged into a separate company, Slick Properties Pvt Ltd, which will later be rechristened as Emami Infrastructure," said N H Bhansali, chief financial officer and president, Emami Ltd, after the board meeting held in Kolkata on Friday.

Both companies have separately informed the stock exchanges about the scheme, which according to Emami will unlock value for all the stakeholders of Emami and Zandu. With the consolidation of the FMCG business under one company, common business bjectives can be achieved with a clear focus on the core FMCG business, Bhansali said.

The combined FMCG business will be EPS accretive for the shareholders of Emami and Zandu. Under the deal, one Emami Infrastructure share will be issued for every three Emami shares, while 14 Emami shares with a face value of Rs2 each will be issued for every one Zandu share with face value of Rs100 each.

Zandu shareholders who are allotted shares in Emami as part of merging the FMCG business will not be eligible for the Emami Infrastructure shares, the companies added in their statement to the Bombay Stock Exchange.

"Both Emami Realty and Zandu Realty will get demerged from group flagship Emami and become subsidiaries of the holding company Emami Infrastructure," Bhansali added.

"Consolidation of the FMCG business under one company Emami Ltd will also ensure various operational synergies, improve profitability and lead to optimum utilisation of the existing manufacturing facilities. Sales and distribution channels of the two companies will also get integrated," Bhansali said.IMAGE: N H Bhansali, chief financial officer and president, Emami Ltd.