By Dow Jones Business News, September 26, 2013, 07:10:00 AM EDT
P&G to Pay Partner Poddar for Cutting Stake in Gillette India
By Ashutosh Joshi
MUMBAI--U.S.-based Procter & Gamble Co. ( PG ) will pay an undisclosed amount to Poddar Heritage Group so that the
Indian company sells, through a public offering, about half the stake it holds in a shaving-products maker majority
owned by P&G.
The deal is part of an agreement to increase the public shareholding in Gillette India Ltd. (507815.BY) to 25%, a
requirement that India's market regulator has made compulsory for all listed companies. P&G and Poddar Heritage hold
88.8% of the company between them.
They were required to cut the holding to 75% by June, but missed the deadline as the regulator rejected a proposal
that included transferring part of Poddar Heritage's stake to P&G and then the consumer-goods company selling those
shares in the open market. As the companies failed to reduce the stake, the Securities and Exchange Board of India
partially froze the voting rights of Gillette India's directors and put curbs on their bonuses and dividends.
P&G currently holds 75.9% of Gillette India and it will reduce the stake to 75% under the deal, Gillette India said in
a filing with stock exchanges. Poddar Heritage, which owns 12.9%, will sell a 6% stake through a public auction.
Poddar Heritage will also withdraw its nominees on the board of Gillette India and act as an ordinary shareholder with
no control of the management, the notice said. Poddar Heritage's Saroj Kumar Poddar is currently Gillette India's
chairman, while his son Akshay Poddar is one of its directors.
The regulator has approved this deal, Gillette India said.
Executives at Poddar Heritage declined to comment on the matter, while P&G didn't respond to an email seeking comment.
Securities and Exchange Board officials didn't respond to phone calls.
The news sent the shares of Gillette India as much as 14% higher on the Bombay Stock Exchange in early trading. They
ended 9.4% up at 2,230.00 rupees, compared with a 0.2% increase in the benchmark index. Trading volume on the Bombay
Stock Exchange Thursday was nearly 40 times the stock's 30-day average.
P&G's efforts to keep its stake in the shaving-products company nearly unchanged, and strengthen its management
control, is in line with a recent trend in India, wherein multinational consumer-goods companies have made similar moves
to consolidate their holdings.
Growth in consumer spending has largely remained unaffected in the country despite the overall economy facing a severe
slowdown--India's gross domestic product expanded 4.4% in the April-June quarter, its slowest pace in four years.
Earlier this year, Unilever PLC spent about $3.2 billion to raise its stake in Indian unit Hindustan Unilever Ltd. by
14.8% to 67.28%. In February, GlaxoSmithKline PLC raised its stake in its Indian consumer health-care unit by 29.3% to
72.5%, spending about 568 million pounds.
Gillette India has recorded more than 20% annual growth in sales volumes in the past three years.
According to the Gillette India filing, the severance payment to Poddar Heritage would come from P&G group's accounts
and won't reflect on Gillette India's books.
Details on the payment would be disclosed later to the regulator and the company's shareholders, the filing said.
Write to Ashutosh Joshi at email@example.com
Corrections & Amplifications
This item was corrected at 7:18 a.m.(1116 GMT) because it misspelled the name of Procter & Gamble in the first
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