With reference to the news report ‘TTK to buy out Reckitt in TTK-LIG’ (Business Line, Nov 10), TTK clarifies that TTK-LIG has always been run on professional and profitable lines. TTK-LIG was run cordially and successfully on well-established mutual agreements between the joint venture partners for over 47 years.
After Reckitt entered the picture, in November 2010, RB sought to unilaterally change the agreements which, in the judgment of TTK, would not have been in the interest of the joint venture, but would have benefited only the foreign shareholder. Hence, the dispute arose which has since been resolved.
The South India-based TTK group has agreed to pay Rs 150 crore for Reckitt Benckiser’s 49.8 per cent stake in condom maker TTK-LIG. “A deal to this effect has been signed and all procedural formalities are over,” said a source in the know of the development.
British multinational consumer goods company Reckitt Benckiser’s stake in the joint venture firm is held through its subsidiary New Bridge Holdings BV.
As a result, condom brands Durex and Kohinoor will go to Reckitt, and TTK will not sell them anymore.
To exit SSL-TTK
In turn, TTK-LIG will exit footcare products company SSL-TTK, which makes the Dr Scholl’s brand and another joint venture firm between the two.
As per the agreement, TTK-LIG will sell its 49 per cent stake in the entity to Reckitt-Benckiser India for a consideration of close to Rs 13 crore. “However, transfer of shares will take place only after procedural clearances such as FIPB approval,” the person said.
A senior TTK official said that both TTK and Reckitt Benckiser parted ways amicably. While TTK gets to keep the manufacturing facilities in Virudhunagar, Puducherry and Pallavaram in Chennai, as part of the deal, the brands move to Reckitt.
TTK-LIG was manufacturing the brands under licence. TTK’s three plants have a capacity to produce 1.5 to 2 billion condoms annually in a market that is seeing around ten cent growth.
TTK itself has launched its own brand of contraceptive called Skore.
Last month, during the hearing of an appeal in the Supreme Court, New Bridge Holdings BV agreed to exit from TTK-LIG, and sell its stake to TTK.
Earlier, the Company Law Board appointed Ernst & Young to value the joint venture company, to enable either one of the parties to exit.
Differences between Reckitt and TTK emerged in May 2011 over everything from nomination of directors to pricing and distribution strategy.
Specifically, according to sources, Reckitt objected to the “lackadaisical manner in which India business was being conducted”. Following this, “TTK unilaterally increased the profit margin for exports to Reckitt group by 35 per cent”.
After that, TTK stopped supply to Reckitt. Sales to Reckitt accounted for 80 per cent of TTK-LIG’s revenues.
The joint venture was originally formed in 1963 between TTK and London International Group Plc. In 1999, LIG was acquired by SSL International Plc.
Two years ago (in 2010), in its biggest acquisition, Reckitt Benckiser acquired SSL International for $3.9 billion. By virtue of that buy, Reckitt became TTK’s joint venture partner.