Hindustan Unilever (HUL) on Monday said its board has given in-principle approval to demerge its ice cream business into an independent listed entity to create a business with a differentiated operating model and supply chain. Ice-cream requires a distinct approach to manufacturing and distribution.
“The demerger of the ice-cream business will create a leading listed ice-cream company in India, which will have a focused management with greater flexibility to deploy strategies suited to its distinctive business model and market dynamics thus realising its full potential,” HUL said in a statement.
The board authorised the HUL management to undertake preparatory steps for the potential demerger of the ice-cream business including preparing the scheme of arrangement.
The decision is subject to approval and the scheme of demerger will be placed before the board and shareholders early next year.
In addition, the Indian ice-cream business will continue with the portfolio, brand and innovation expertise from parent Unilever, which decided to spin off its ice cream business earlier this year.
The ice cream category accounts for ₹2,000 crore or roughly 3% of HUL’s total sales with brands such as Magnum, Cornetto and Kwality Wall’s.
Unlike the home and personal care categories where HUL is a dominant leader, the company trails Amul in the Indian ice-cream market besides competing with several local and global brands such as Mother Dairy, Vadilal, CreamBell, Naturals, Havmor and Baskin Robbins.
“A separate listed entity will unlock fair value for HUL shareholders and give them the flexibility to stay invested in ice cream’s growth journey. Demerger will also facilitate a smoother transition for business as well as our people,” HUL said.
Unilever is the world’s biggest ice cream maker with brands such as Ben & Jerry and Magnum. The ₹7.9 billion business contributes 16% of its global revenue. It is also a market leader in several countries.
In March, Unilever announced a plan to separate the ice cream business globally, and eventually divest it, with global private equity firms also being potential acquirers. Any potential deal in India will involve global alignment with what Unilever chooses to do with its ice cream business.
Source: Economic Times