WADIAS, DANONE TO PART WAYS FROM BRITANNIA; INDIAN PROMOTERS TO BUY OUT THE FRENCH FOOD GIANT

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April 15, Apr 15, 2009 (Asia Pulse Data Source via COMTEX) -- BYBRF | Quote | Chart | News | PowerRating -- Nothing lasts forever, be it a good partnership or even a feud. The 117-year-old biscuit major Britannia Industries Ltd, saw yet another change it its ownership when French food giant, Groupe Danone decided to sell off its indirect stake holding in the Kolkata headquartered company to the Wadias.

Putting an end to nearly four years of acrimony, Danone and the Wadias struck a deal under which the French firm agreed to sell its indirect stake of 25.48 per cent held in Britannia Industries Ltd (BIL) to Leila Lands, a wholly owned subsidiary of a Wadia Group company, Bombay Burmah Trading Corporation.

Leila Lands will acquire 100 per cent in Britannia Brands Ltd (BBL), which holds an indirect stake of 25.48 per cent in Britannia Industries Ltd (BIL), from Danone Asia Pte Ltd. Subsequently, Leila Lands will hold 50.96 per cent stake in BIL.

It is estimated that Wadias will have to pay anywhere between 175 million dollars to 200 million dollars for buying out Danone out of BIL, which will take place through an inter se share transfer (amongst the promoters).

Danone and Wadias hold equal stake in Britannia Industries through their joint ownership of Associated Biscuits International Holdings, UK which is a 50 per cent subsidiary of Britannia Brands Ltd. The French firm?s wholly-owned subsidiary, Danone Asia Pte has 100 per cent stake in Britannia Brands Ltd. While Danone?s stake holding in BIL is complex, BIL itself has also undergone a number of changes in ownership, since its humble beginning in 1982. From the V S Brothers to Englishman, C H Holmes, who entered as a partner to Britannia Biscuit Co Ltd in 1918, the company has passed through different managements and ownerships.

Even after its rechristening to Britannia Industries Ltd in 1979, many owners had come and gone. More importantly, fight between partners in the company is not new. Who could forget the bitter tussle between the current owners Wadias and the ?Biscuit King? Rajan Pillai, who secured control of the firm in 1980s? The fight that broke out after Wadias? stake acquisition in Associated Biscuits International Holdings, UK in 1993 and thus becoming an equal partner with Danone in BIL, is a part of folklore of Indian corporate battles.

Living up to its true history, another tussle emerged between the Wadias and Groupe Danone in late 2006 as the French firm began to explore and execute independent business plans in India. As per their JV plans, which had been in existence for over a decade, the Wadia family was to be Danone?s partner in the food and dairy business. Also, Danone was expected to launch products from its global portfolio in India. Somehow, it didn?t materialize. Moreover, their 1995 joint venture deal prohibited Danone from launching food brands within India without the consent of the Wadias, besides agreeing that partners would have the right of first refusal to buy out the remaining partner in the event of the other wishing to sell its holding.

Danone?s investment in Bangalore-based bio-nutrition firm Avesthagen didn?t go down well with the Wadias, who alleged that it violated Press Note 1, 2005, which requires a foreign company to obtain consent of its Indian joint venture partner before pursuing an independent business in a similar area, including joint ventures based purely on technical collaboration.

This was contested by Danone, arguing that Press Note 1 did not apply to it as it did not have a formal technology transfer or trademark agreement with Avesthagen, and that its 25 per cent holding in Britannia was indirect.

Wadias also filed a case at the Bombay High Court over the same matter citing breach of a non-compete clause. The court had directed Danone not to ?alienate, encumber or sell? its stake in Avesthagen.

Danone?s claims that it does not need a non-compete waiver from the Wadias to enter into business in India alone was also rejected by the Foreign Investment Promotion Board.

While the seeds of acrimony were sown by Avesthagen issue, a fullblown fight broke out between Britannia Industries Ltd and Danone for alleged intellectual property violation of the Indian biscuit maker?s popular Tiger brand by the French firm. In September 2007, BIL initiated legal action against the French food giant in Singapore. The company had then said: ?Based on legal advice and under the direction of its IPR committee, Britannia - which is jointly controlled by Nusli Wadia and Danone - has initiated legal action against Groupe Danone in Singapore pertaining to Tiger IPR.?

Danone, however, maintained a different position from Britannia and said it had tried to find a solution amicably. So a third party as a judge will be welcome to arbitrate.

Wadia Group chief Nusli Wadia had even resigned from the BIL?s IPR panel to ensure that there was no conflict of interest in dealing with the Tiger IPR matter.

Wadia alleged that Danone had moved to establish the Tiger brand as its own property in 70 countries and had managed to obtain the ?Tiger? registration in 40 countries without informing Britannia. While the matter awaits resolution, the recent agreement reached between Wadias and Danone over stake sale in BIL is seen as the beginning of a resolution of the dispute that had dogged the two partners.

There is, however, no clarity as to how far the sparring parties have been able to reconcile over the Tiger brand IPR issue as both companies are tightlipped.

On the whole, while the buying out of Danone by Wadias will enable the French food major to chart its own course in India, BIL can also be less fearful of competition from its erstwhile stakeholder. Danone has already sold its global business to Kraft Foods and it is focusing on dairy and probiotic products along with interests in water business.

A new chapter awaits both Britannia Industries and Groupe Danone as they walk separately on the road to future.

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