Dalda changing hands; Unilever deal with palm oil mogul

KARACHI (June 16 2004): Leading palm oil importer Bashir Janmohammad, in collaboration with an Employees Group led by Pervez Khan, Director Production, has reportedly purchased the Selected Oils and Fats Business (SOFB) of Unilever Pakistan Limited (UPL) for Rs 1.4 billion.

The deal involves purchase of trademark and licence rights in Pakistan for Dalda Vanaspati; Dalda Melonge; Dalda Cooking Oil; and Dalda Planta. All the assets including plant and machinery, buildings, SOFB land but excluding third party installation for packing, and, the inventory of raw material, work-in-process and finished goods on hand as on closing date.

The plant and machinery transfer will also includes the plant for margarine. However, UPL intend, to enter into a toll-manufacturing licence with the buyer for use of the margarine plant to produce UPL products.

The buyer also has the option to enter into a sales and distribution arrangement with UPL for distributing various Dalda products.

If and when the two above mentioned arrangements are concluded, the two parties will sign a non-compete agreement whereby UPL will not enter the edible oil business for a specified period and the buyer will not enter the margarine product range for five years. Unilever Asia (Pte) Limited had appointed Hongkong Shanghai Banking Corporation as exclusive advisor in connection with the disposal of SOFB.

According to informed sources, UPL was expecting the bids in the range of Rs 1.5 to 1.6 billion.

The three leading bids came from Westbury Group in collaboration with the Employees Group comprising Production and Engineering personnel. The second highest bid was said to be from Habib Oil at Rs 1.35 billion and the third was from Savola in collaboration with Fauji Foundation and Jahangir Siddiqui & Company for Rs 1.27 billion.

Manufacturing facilities: Production facilities of SOFB are situated in SITE on an area of 9.72 acres. The oil refinery is highly automated and utilises an advance technological process with neutralisation and bleaching capacity of 43,800 tonnes per year, deodorization 120,600 tonnes and interesterification 30,200 tonnes a year. At present, the factory is operating at 85 percent of the installed capacity. The value of land, plant and machinery is said to be around Rs 700 million.
<br> The cooking fats and oil market in Pakistan is about 1.2 million tonnes of which vanaspati accounts for 0.875 million tonnes and edible oil about 0.325 million tonnes. Of the total market of 1.2 million tonnes, the branded market is about 51.65 percent and the remaining 48.35 is unbranded or sold as open ghee.

Companies with national presence dominate the premium segment. Dalda is the overall market leader and its net proceeds from sales are about Rs 2.05 billion.

Dalda brand was launched in British India in 1938. Its vanaspati had the smell and colour of 'Real Ghee' which was the medium derived from animal fat. Dalda Cooking Oil was launched in 1981 in order to capture the shifting preference of health conscious consumers.

SALES NETWORK: UPL distributes SOFB products through a countrywide network of 500 distributors and 250,000 outlets. Approximately 60 distributors are in main towns and contribute 60 percent of the sales.

UPL is a 67.04 percent subsidiary of Unilever Overseas Holding Limited (UK) and has been operating in Pakistan since 1948. With a turnover of over Rs 21.42 billion it is a leading consumer product company of Pakistan.

Despite its strong track record and being clear leader in the market with 9.7 percent of total branded share (vanaspati 7.4% and edible refined oil 16.4%) in Pakistan, UPL had to sell its SOFB products as part of Unilever's global strategy focus on core brand and product areas.

According to informed sources the senior employees had made two competing groups to make a bid. One group comprised production and engineering managers, and the other marketing and finance managers.

The second group was reported to have negotiated with a consortium comprising UBL and Croby (UK) but the final arrangement broke down of before the bidding. There are 196 employees including 43 percent in the management cadre in the SOFB section of UPL.

The first group aligned with Westbury Group of Companies led by Bashir Janmohammad, who are the leading importers of palm oil and are establishing an edible oil refinery at Port Qasim in a joint venture with Malaysia.

UPL imports 44 percent of the raw material ie palm oil, from Malaysia, as RBD palm oil (35%), and palmolein (9%) ie 10,800 and 9,050 tonnes respectively.

Unilever Pakistan is currently in the process of finalising the transaction, expected to be completed within a few weeks.

In due course, notices will be issued for convening an extraordinary general meeting of the shareholders of Unilever Pakistan for approving the sale.

Unilever Pakistan has decided to focus on developing its core business in Pakistan and internationally too it has already divested its edible oils business.

The Westbury Group of companies belongs to a former president of Karachi Stock Exchange, Bashir Janmohammad. He has some other partners also in Dalda business.

Dalda is a brand established in pre-partition days by Hindustan Lever. Unilever continued with the brand name of Dalda in Pakistan in 1947.

Dalda is the largest selling brand in Pakistan and is marketed all over the country.

The Board of Directors of Unilever, London, changed their global strategy and decided to disinvest in vanaspati wherever they were producing Dalda. As a first step in December 2003 they disinvested Dalda in India and it was taken over by multinational company Punge. Then the Lever Brothers Pakistan started process of disinvestment in Dalda.

The deal with Westbury Group is said to be a win-win for both parties as the buyers consortium has a strong linkage with the world oil market and with the employees, and UPL has confidence that its brand 'Dalda' – household name – will be in good hands; as the highly trained workforce knows how to keep the quality and protect the brand image.

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