Merger driven by Venture Capital

The Board of Directors of JHS Svendgaard Laboratories Limited announced merger of the company with private company Vedic Cosmeceuticals Private Limited. As acclaimed by the management, the product portfolio of Vedic Cosmeceuticals Private Limited is complimentary to that of JHS Svendgaard Laboratories Limited’s products. Interestingly, the merger is reverse merger in which listed company will merge with unlisted private company which will get listed (and converted to public company) post the reverse merger. Both companies have common shareholder: Sixth Sense India Opportunity Fund, a venture capital fund. Let us understand the different facets of the transaction.

JHS Svendgaard Laboratories Limited (“Transferor Company”) is a listed public limited company engaged in Personal Care Industry. This company is engaged in manufacturing and selling (Exports) of Toothbrushes, Toothpastes, Mouthwash, Denture Tablets, and other allied Oral care Products. Apart from working on its own brands the company also offers Contract Manufacturing Partnership to brands in the domestic and the international market. The registered office of the company is situated in the state of Himachal Pradesh.

Recently, JHS Svendgaard Laboratories Limited completed demerger & merger transaction. Please read our article in M&A Critique to understand earlier transaction in detail.

Vedic Cosmeceuticals Private Limited (“Transferee Company”) is a company engaged in Personal Care Industry. This Company is engaged in developing, manufacturing, and selling of high-quality cosmetics products like Baby Care, Skin Care (Eg: Sunscreen, Face Mask, etc.), Body Care, Hair Care, Intimate Care, Pet Care, Spa products, Grooming, etc., that are made with natural ingredients. The registered office of the Company is situated in NCR, Delhi however the company is in the process of shifting its registered office to Haryana.

The Transaction:

The Scheme of Amalgamation inter-alia provides for:

• The merger of JHS Svendgaard Laboratories Limited with Vedic Cosmeceuticals Private Limited
• Recording of understanding between promoter groups (JHS & Vedic) on managing the merged company

Rationale as envisaged under the scheme:

• The Transferor Company is engaged in the business of manufacturing, selling, and exporting Toothbrushes, Toothpastes, Mouthwash, Denture Tablets, and other health care products such as Hand Sanitizer, Room Fresheners etc. Apart from this, the Transferor Company also offers contract Manufacturing Partnership to Domestic and International market. On the other hand, the Transferee Company is engaged in developing, manufacturing, and selling of high-quality skincare products for Baby care, Hair Care, Body Care, Intimate Care, Pet care, Spa Products and Grooming products. Some prominent brands with whom the Transferee Company is currently working are Unilever, Nykaa, St. Botanica, The Moms Co., Sugar, Sirona, Bombay Shaving Company, Colorban, Beardo, New U, Skinraft, Arata, TNW.
• The Transferor Company and Transferee Company belong to the Fast-Moving Consumer Goods (FMCG) Industry and having a similar line of Business and same customer base. Further, the product base of Transferee Company is wider in comparison to that of the Transferor Company and at the same time, has more growth potential from prospects considering the usage of advanced technology in production.
• Other benefits such as competitive strengths, better management, better customer reach etc.

The Appointed Date for the merger is 1st April 2024. Post-merger, the equity shares of the transferee company will be listed on the bourses….

Conclusion

Clearly the aim for the restructuring will be to create larger portfolio and indirect listing of Vedic. Considering the shareholding pattern, it can be concluded that the merger has been arranged by the venture fund. Further, the timing of the scheme is also seeming to be special. As soon as the earlier scheme announced by JHS became effective, this proposed scheme has been announced. It looks for announcing the proposed scheme, stakeholders were waiting for giving effect to the earlier scheme.