MUMBAI, March 16: The boards of Hindustan Lever Ltd (HLL) and Pond's India Ltd on Monday announced a swap ratio of three shares of HLL for every four shares of Pond's India. The two boards approved the merger ratio and the draft scheme of amalgamation at separate meetings in Mumbai.The proposed amalgamation of Pond's India with HLL is effective from January 1, 1998, subject to necessary approvals. According to a joint statement issued by the two companies, steps wil now be taken to obtain an approval for the merger including the exchange ratio from the shareholders and the high courts of Madras and Mumbai. The share exchange ratio has been computed jointly by senior partner of SB Billimoria & Co YH Malegam and senior partner of NM Raiji & Co Arun Gandhi. The statement said that the valuation was arrived at by adopting a combination of three methodologies with approproate weightages. The methodologies are yield-value-per-share, the market price for the shares of the two companies in the stock exchanges andasset value of the shares of the two companies as on December 31, 1997. The weightages given to the three methodologies are 2, 2 and 1.
The statement said that the recommended ratio has been reviewed and independently confirmed by two separate merchant bankers, ICICI Securities & Finance Co (appointed by Pond's) as fair and reasonable to Pond's shareholders and ANZ Investment Bank (appointed by HLL) as fair and reasonable to HLL shareholders. All Pond's employees will, consequent to the merger, become employees of HLL with full protection of their existing terms and conditions of services, according to the statement.
Both the companies are 51-per cent subsidiaries of Unilever plc. The two have significant overlaps in personal products, speciality chemicals and exports. The distribution system for personal products was merged in 1993. The boards of the two companies believe that the proposed merger will enable the two companies to realise greater synergies. The two have a common management pool and atechnology base.
HLL posted a net profit and turnover of Rs 580.25 crore and Rs 7,820 crore in the year ended December, 1997. During the period, Pond's posted a net profit of Rs 61 crore and net sales of Rs 470 crore.
The officials also said that shareholders of Pond's had indeed got themselves a good deal.
Besides, it must be remembered that Pond's shareholders will benefit from the fact that they move from a single-product category company to a multi-product category company, which means a higher discounting. In terms of share price, there will be a slight enhancement of value for Pond's shareholders, since 75 per cent of Lever's share price of around Rs 1,580 works out to Rs 1,185, slightly higher than Monday's closing price. In terms of dividend too, the ratio will ensure that Pond's shareholders will actually receive a slightly higher dividend.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
