The Competition Commission of India has cleared a proposal by G&K Baby Care – a subsidiary of Danone Asia Pacific – to acquire the nutrition business of Wockhardt Ltd.
The competition watchdog has also approved two other related acquisitions.
These include G&K's plans to acquire the contract manufacturing business of Carol Info Services Ltd (a fellow subsidiary of Wockhardt) as also a proposal by Danone Asia Pacific Holdings to acquire certain intellectual properties that are used in nutrition business from Wockhardt EU Operations Swiss AG.
In its latest order, the Competition Commission of India (CCI) said that the “proposed combination is not likely to have an appreciable adverse effect on competition in India.”
Early last month, the two companies had formalised an estimated Rs 1,600-crore deal, where Danone would acquire Wockhardt's nutrition business and brands as well as its related industrial operations from Carol Info Service, located in Punjab.
FCCB issue
Though the CCI clearance is one regulatory approval for the deal, the debt-saddled Wockhardt's deal still awaits approval from the Bombay High Court. Wockhardt is in the thick of litigation with creditors, after defaulting on the re-payment of its $110 million FCCB (foreign currency convertible bonds), in 2009.
Wockhardt did not comment on the CCI approval, as it awaits Court approvals.
‘No adverse effect'
The CCI noted that the proposed ‘combination' would involve transfer of the nutrition business relating to protein-based supplement products, in-licenced pre-biotic and pro-biotic products, and infant and child nutritional products of Wockhardt Group to G&K and Danone Asia Pacific (group companies of Danone SA).
It observed that Wockhardt offers different brands with different product variants in two segments of baby food business – cereals and milk food. “As per the details provided by the acquirer (G&K and Danone), the share of Wockhardt group in both the segments of baby food business in India is less than seven per cent,” the CCI added.
On the medical nutrition business, CCI said that the share of Wockhardt Group was less than 10 per cent in the Indian market, where other prominent players include Abbott and Zydus Cadila.
In fact, Wockhardt had initially agreed to sell its nutrition business to Abbott in 2009. But this fell apart last year, when they terminated the agreement “unable to resolve debt restructuring issues with some of its (Wockhardt's) lenders.”
Wockhardt had gone in for corporate debt restructuring in April 2009.
Danone's presence
On the other hand, the activities of Danone Group in India relates to bottled water and fresh dairy products, the CCI said, adding that “Danone Group has no presence in India in any activity that either competes or is vertically related to any of the businesses proposed to be acquired.”
Given the significant presence of other players in the baby food and medical nutrition businesses, the proposed combination is not likely to have a significant competition concern in India, the Commission added.