Godrej May Raise $150 Million for Sara Lee Unit, Acquisitions

May 18 (Bloomberg) -- Billionaire Adi Godrej said his Godrej Consumer Products Ltd. may raise as much as $150 million selling shares to fund its purchase of Sara Lee Corp.’s stake in an Indian venture and other acquisitions.

India’s second-biggest maker of bath soap plans to sell shares worth more than half of the 185 million euros ($228 million) it agreed to pay for Sara Lee’s 51 percent stake in their joint venture, said Godrej.

“We might want to raise a little more equity this time so that later on we can raise a little more debt, if required,” he said in a May 14 interview in Mumbai, where Godrej Consumer is based. Godrej, the company’s chairman, and his family rank 148th in Forbes magazine’s list of billionaires with a net worth of $5.2 billion.

Godrej Consumer will buy companies in Asia, Africa and Latin America and has permission from its board to raise as much as 30 billion rupees ($657 million) through debt or selling shares, the billionaire said. The maker of Cinthol soaps and Renew hair color will continue to invest in emerging markets and probably not in developed countries because its expertise is in “low-cost, value for money products,” Godrej said.

“Godrej shareholders are happy because all the acquisitions have been earnings-per-share accretive with similar profiles in terms of operating margins and valuations,” said Anand Shah, an analyst at Angel Broking Ltd. in Mumbai who has an “accumulate” rating on the stock. “The only concern is whether the company has adequate management resources to integrate so many acquisitions and whether they have adequate synergy.”

Overseas Sales

Godrej Consumer fell 2.5 percent to 337.60 rupees yesterday while the benchmark Sensitive Index declined 0.9 percent. The stock’s loss pared its gain this year to 28 percent.

The acquisitions, including some being planned that haven’t been announced, will probably increase the percentage of sales the maker of soap and hair color derives from overseas to 35 percent from about 25 percent now, Godrej said. The company reported sales of 20.4 billion rupees and profit of 3.4 billion rupees for the 12 months ended March.

“We think that we have cash generation which is far beyond the needs for our organic growth in India, so investing our cash generation in acquisitions is good,” Godrej said.

The company will seek growth in India or overseas, he said. “We want growth -- whether it’s from inside or outside India, we are agnostic to that.”

Insecticide Business

Godrej Consumer is also in talks with Downers Grove, Illinois-based Sara Lee to acquire its global household insecticide business. “We are interested in that but we are not sure of the outcome of it,” Godrej said.

Godrej agreed on May 12 to buy Sara Lee’s stake in their venture.

Sara Lee has been selling units to focus on coffee and food. Last year it agreed to sell its toiletries business to Unilever NV and its air-fresheners business to Procter & Gamble Co. for a combined 1.59 billion euros and said both transactions will close this year.

Godrej Consumer is seeking to acquire businesses to widen its portfolio of hair color and personal hygiene products as well as household insecticides in emerging markets such as China and Egypt, Godrej said.

Six Acquisitions

Including the 51 percent stake in Godrej Sara Lee, the company has announced at least six acquisitions worth more than $395 million over the past year. The value doesn’t include purchases in Indonesia, Nigeria and the 50 percent stake in Godrej SCA Hygiene Ltd., where transaction values weren’t disclosed.

In April, Godrej Consumer agreed to buy Indonesian insecticide maker PT Megasari Makmur for an undisclosed price. The purchase would add 500 million rupees to profit for the year ending March, Godrej said May 7.

A month before that, the company said it entered into an agreement with Nigeria’s Tura Group to buy Tura, which manufactures and distributes products such as soaps, moisturizing lotions, and skin creams.

Godrej plans to fund the Indonesian and Nigerian acquisitions by raising debt, he said.