Wadia and Danone
The Wadias' Kalabakan Investments and Groupe Danone had two equal joint venturecompanies, Wadia BSN and UK registered Associated Biscuits International Holdings Ltd.,which together held a 51 per cent stake in Britannia.
The ABIH tranche was acquired in1992, while the controlling stake held by Wadia BSN was acquired in 1995. It was agreedthat, in case of a deadlock between the partners, Danone was obliged to buy the Wadia BSNstake at a"fair market value". ABIH had a separate agreement signed in 1992 and was subject
to British law.
Wadia was to be Danone's partner in the food and dairy business, and product launches from
Groupe Danone’s were expected but never materialised despite the JV being in existence for
Under the 1995 joint venture agreement, Danone is prohibited fromlaunching food brands within India without the consent of the Wadias.
In addition, thepartners agreed there would be the right of first refusal to buy out the remaining partner in theevent of the other wishing to sell its holding.
In May 2007, Nusli Wadia told the Ministry of Commerce and Industry that Danone investedin a Bangalore-based bio nutrition company, Avesthagen,in October 2006 in violation of the
government's Press Note 1, 2005, which requires a foreign company to obtain the consent of its Indian joint venture partner before pursuing an independent business in a similar area,including joint ventures based purely on technical collaboration. Danone argued that PressNote 1 did not apply to it as it did not have a formal technology transfer or trademark agreement with Avesthagen, and that its 25% holding in Britannia was indirect.
Wadiaalso filed a case in the Bombay High Court for a breach of a non-competition clause in thatconnection. The court ordered Danone not to alienate, encumber or sell shares of Avestagen.
In September 2007, the Foreign Investment Promotion Board of India rejected Danone'sclaims that it did not need a non-compete waiver from the Wadias to enter into business inIndia alone.
In June 2006, Wadia claimed Danone had used the Tiger brand to launch biscuits inBangalore.
After a prolonged legal battle, Danone agreed to sell its 25.48% stake in Britannia to LeilaLands, which is a Wadia group entity based in Mauritius, and quit this line of business. Thedeal was valued at $175
200 m. With this buy-out, Wadia holds a majority stake of 50.96%.
Growth and profitability
The company is growing at a steady rate, and is currently profitable. Between 1998 and 2001,the company's sales grew at a compound annual rate of 16% against the market, andoperating profits reached 18%. More recently, the company has been growing at 27% a year,compared to the industry's growth rate of 20%.At presen
t, 90% of Britannia’s annual revenue of