Impact of Godrej’s Acquisition of Megasari Indonesia

After Africa, Godrej Consumer is now eyeing the Indonesian market. Today it announced its decision to acquire Megasari Group, a leading household care company in Indonesia. With revenues of US$120MM in 2009 (+20% y/y), Megasari holds dominant market shares in household insecticides (35%), air care (45%), wipes (80%), and breakfast cereals (15%) segments. The three leading brands (Hit insecticide, Stella air care and Mitu baby wipes) contribute 71.8% to total sales.

This acquisition will add approximately 25% to GCPL’s consolidated top line with operating margins likely in the mid-teen range. While no financial details have been disclosed for the transaction by the company, some media reports (ET Now) have reported that the likely purchase price for Megasari is Rs12B, which implies valuation at P/Sales of 2.2x. For the previous acquisitions, GCPL had valued Kinky at 2.8x P/Sales while the purchase of a 49% stake in Godrej Sara Lee was done at a valuation of 2.3x P/Sales.

GCPL will look to fund this acquisition via a combination of cash and debt. This acquisition fits well with GCPL’s strategy of pursuing a global emerging market footprint.