Britain’s Actis, one of the earliest private equity investors to enter India, is gearing up to sell its eight-year-old investment in Super-Max, the world’s second largest shaving products maker after GilletteNSE 0.39 %, said sources in the know.
The development comes in the middle of a fierce legal battle between the fund and the founders which, according to the sources, might have halved the value of Actis’ holding in Super-Max over time.
Actis has hired Morgan Stanley for advice on the stake sale that may attract a host of investors, including some global personal care companies. The PE firm owns a 40% stake in the company, though its economic interest is estimated to be much higher as some of its holding is in the form of preference shares. Founders Rakesh Malhotra and his family own the remaining stake.
The fund had invested around $225 million for a 29.17% stake in Super-Max Group in March 2011, valuing the company at $700 million. It subsequently raised the stake to 40%. After the acquisition, Actis spotted discrepancies in the company’s accounting practices and hired forensic accountants for review, according to sources ET spoke to.
The two sides locked horns after Actis passed resolutions to terminate Rakesh Malhotra, also known as Rocky, and two other nominees of the founders from the company’s board in 2017.
A spokesperson for Actis declined comment when contacted.
Actis had in the past tried to clinch a deal and were in discussions with Gillette and EmamiNSE 0.57 % but the legal issues weighed on the process.
Super-Max has global operations with nearly half its sales derived from exports to the UK, Europe, North America, Africa and the Middle East. Its products are stocked by some of the leading retail chains, including an arm of the US pharmacy chain Boots.
The Malhotras have consistently denied any wrongdoing and dragged Actis to the National Company Law Tribunal (NCLT), alleging that the fund had destroyed the company’s value and oppressed the majority shareholders by taking control of the management.
The chief executive officer and the chief financial officer of Super-Max are both Actis’ appointees.
The Malhotras, who own Super-Max Personal Care and Vidyut Metallics Pvt Ltd through which they control Super-Max Group, have seen factional disputes within the family over ownership.
Rakesh and his father Rajinder Kumar Malhotra were in a face-off since 2014. In December 2015, the Bombay High Court allowed Rajinder to take control of the group. Rakesh, the eldest son of Rajinder, had filed an appeal through Super-Max Personal Care, challenging a previous Company Law Board order that asked former directors of the firm to hand over assets of Vidyut Metallics to the directors appointed by Rajinder in December 2012. Later, the promoters settled the dispute amicably.
Actis has a track record of fetching handsome returns on its FMCG investments. It sold its controlling stake in Paras Pharma to Reckitt Benckiser in 2010 in a $700-million deal, reaping a three-fold return.
Personal care brand Unilever spent $1 billion in 2016 to buy men’s grooming startup Dollar Shave Club to challenge Gillette’s dominance of the US market. Closer home, fast moving consumer goods (FMCG) company Emami made a strategic investment in male grooming brand The Man Company by picking up a minority 30% stake for an undisclosed sum by infusing funds into brand owner Helios Lifestyle Pvt Ltd. The acquisition also marked Emami’s entry in the fast-growing online male grooming segment.
Marico, too, acquired a 45% stake in online grooming company Beardo in March last year and has also launched an exclusive brand Studio X online.
Source: Economic Times