The joint venture agreement also entails the transfer of HLL's animal feeds brands to GFFL. As per the agreement, which is effective from January 1, 2001 and was structured by merchant banker Lazard Credit Capital on behalf of Godrej Agrovet, HLL will continue to hold a strategic 26 per cent stake in GFFL.

While the cost of the acquisition was not disclosed, industry analysts believe this would be around Rs 450 crore. Godrej Agrovet will fund the acquisition through borrowings and internal accruals.

Addressing a press conference on Monday, Godrej Soaps chairman Adi Godrej said: "It will make Godrej Agrovet the leader in its major area of animal feeds business. It will also derive considerable synergies in the business as GFFL leads in animal feeds and Agrovet in the poultry and cattle feed."

The joint venture will bring together skills in R&D in both the companies, Mr Godrej said. The combined market share of the joint venture in the animal feeds business will be to the tune of 25 per cent. It will also enable Godrej Agrovet to get a better geographical spread with GFFL having a strong presence in the western and southern markets.

The share price of Godrej Soaps on Monday registered a 1.02 per cent jump to close at Rs 59.75 over its previous close.

The board of the joint venture company will comprise eight directors - three from HLL, and five from the majority owner Godrej Agrovet. Mr Adi Godrej will also be the chairman of the joint venture, and GFFL managing director Arjun Uppal will head the operations.

GFFL is the largest player in this business with a turnover of close to Rs 300 crore. It sells its animal feeds under brand name "Gold Mohur" which has a strong equity in the poultry and cattle feed market.

Godrej Agrovet sells its animal feeds under the brand names "Bypro," "HPMR," "Milk More," "Crumbro," among others. The distribution networks will continue to operate separately. The entire animal feedstuff market volume stands at three million tonne.

With a turnover of abour Rs 350 crore, Godrej Agrovet employs more than 800 employees and has 26 manufacturing units across India. GFFL employs 375 employees.

HLL free to go in for forward integration
Hindustan Lever's interest in holding a strategic 26 per cent in Goldmohur Foods & Feeds (GFFL) indicates the multinational's future interest in forward integrating into broiler marketing, branded eggs, among others.Even as a non-compete clause in the joint venture agreement restricts the multinational from carrying out business in the field of animal feeds, except through the joint venture company, GFFL, HLL is free to go in for forward integration of the animal feeds business. This was confirmed by Godrej Agrovet managing director Dr SL Anaokar.

According to an HLL spokesperson: "HLL decided to retain 26 per cent in the company in the best interest of all shareholders. Securing board level positions is in the long-term growth of the company and will also enable HLL to understand skills in the forward integration chain."

HLL had earlier announced its intention to exit the animal feeds business to align its business focus with that of its parent company Unilever. It had transferred the animal feeds business to a wholly-owned subsidiary, GFFL, in April 2000.

Industry analysts point out that getting into forward integration of animal feeds business would also gel with the multinational's plans to expand its foods business to cater to the consumer's daily needs. HLL is also into branded atta, salt, ketchup, culinary, edible oil, soups, bread, among other such food items.