MUMBAI: Soft drinks giant Coca-Cola and Zydus Cadila group are advancing on a potential deal to acquire Kraft Heinz’s brands Complan and Glucon-D, among others, in a deal worth more than $700 million (over Rs 5,000 crore), people directly aware of the matter said. The offers for the Kraft Heinz brands are expected later this week.
The line-up of bidders narrowed down after Tata Global Beverages and others exited the fray in recent weeks. Another suitor ITC is more keen on pursuing the bigger acquisition of GlaxoSmithKline’s (GSK’s) Horlicks-led portfolio, also being auctioned currently. JP Morgan, which is advising Kraft Heinz on the sale process, has opened the fray to select strategic buyers.
Meanwhile, private equity investors like True North have approached the Ahmedabad-headquartered Zydus Wellness, the consumer products subsidiary of Cadila Healthcare, for a possible link-up on the deal. But the Pankaj Patel-spearheaded pharma and wellness group is expected to make a solo bid with the flagship Cadila Healthcare extending corporate guarantees to arrange bank financing for the possible acquisition, sources said.
Coke, Zydus to bid for Kraft’s brands Complan, Glucon-D
But a private equity tie-up is not being ruled out if Zydus emerges successful. Avendus Capital is advising Zydus, while Citigroup is working with Coca-Cola on the bid.
Coca-Cola is pursuing acquisition-led opportunities to reduce dependence on the sugary, carbonated drinks in a health-conscious era. Last week, it snapped up UK-based Costa Coffee for $5.1 billion as part of a diversification plan. If the cola giant gets the deal, this would be its most ambitious India bet after acquiring Thums Up from Ramesh Chauhan in the 1990s.
When contacted, Cola-Cola, Zydus and True North declined to comment.
Sources said Tata dropped out of the race after indicating that it was not interested to buy all the brands on sale. Tata was keen on bagging Glucon-D as the energy drinks category has shown better growth buoyancy in the recent past.
Complan and Glucon-D contribute equally (around 40%) to Kraft Heinz’s Indian turnover of Rs 1,400 crore. The balance 20% comes from brands like Nycil, Heinz ketchup and dairy. The $26-billion Kraft Heinz is the fifth-largest food and beverage company in the world and wants to focus on it’s billion-dollar global brands in the world’s fastest growing major economy.
Incidentally, Kraft Heinz and GSK are mulling an exit from the roughly $1-billion milk health food drinks category — in which Complan competes with market leader Horlicks and the likes of Bournvita and Boost — when it has slowed down owing to the emergence of other healthy alternatives like juices. However, the health beverages platform could help an acquirer like Zydus, which is keen on bulking up its wellness and consumer products unit with brands like Nutralite and SugarFree.