KARACHI (July 13 2004): The board of directors of Unliver Pakistan has recommended for acceptance of the bid for Rs 1.33 billion from Westbury Group, its associates and certain senior management employees of Unilever Pakistan, who have now formed a separate company, Dalda Foods (Private) Ltd.
Unilever Pakistan Ltd will take approval of the shareholders at the extraordinary general meeting on August 9 for the sale of the company edible oil business, excluding margarine business, for Rs 1.33 billion.
A notice of the company sent to the Karachi Stock Exchange (KSE) on Monday said that the group comprising Westbury Group, its associates and certain senior employees of Unilever Pakistan, has made the highest offer of Rs 1.4 billion for the oil and fats business, together with the goodwill associated with that business, for restraint of trade and for the trade marks used in this business. Unilever has agreed to sell the Dalda and Planta trade marks for a consideration of Rs 70 million.
The balance amount of Rs 1.330 billion would be paid to Unilever Pakistan. The bidder would also acquire the inventories relating to the business, at the book value as at the date of closing.
The second highest bid received by Unilever Pakistan was Rs 1.357 billion.
The company said that the edible oil business in Pakistan involves competing in the commodity market influenced by commodity prices, heavy sales promotion, and little opportunity for brand differentiation and flexibility in pricing.
Unilever Pakistan cannot operate competitively in this category despite the strong heritage and emotional value linked with the Dalda brand.
In addition, the introduction of general sales tax in 2002 has put pressure on the business, which was further exacerbated by higher international oil prices. Last year, there was a steep increase of about 24 percent in the price of imported oil.
The sale of the oils and fats business (excluding the margarine business) is further driven by the need for Unilever Pakistan to focus on developing its core business that are key to its long-term strategy to build shareholder value in the longer term.
The core business for Unilever Pakistan consists of detergents, soaps, personal products, beverages, foods (including margarine) and ice cream. Internationally, Unilever has already divested from its edible oils business, as this is not central to the development of its future global strategy. As a result of the sale by Unilever Pakistan of its oils and fat business, Unilever Pakistan will enhance its focus on its core business in Pakistan, which is vital for its long-term future.
Unilever Pakistan would not transfer its employees engaged in the oils and fats business to Dalda Foods (Private) Ltd. However, Dalda Foods (Private) Ltd may consider to re-employ anyone of them at its discretion.
Unilever Pakistan is seeking shareholders' approval for the sale of its oils and fats business on the following basis: sale and transfer of all fixed assets including the plant and machinery for margarine and the inventory of raw materials, work-in-process, consumables and finished goods on hand as on the closing date, and the intellectual property right and goodwill associated with that business.
Unilever Pakistan will not transfer into the oil and fats business for a period of five years. The company would retain all receivables and payable balances associated with the business.
The company would get Rs 475 million on account of land and building, Rs 475 million for plant, machinery and fittings, Rs 30 million for intellectual property, Rs 100 million for goodwill and Rs 250 million for restraint of trade.