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14 February 1998

Lakme shares plunge after deal

MUMBAI, February 13: The share price of Lakme took a severe beating on the stock exchanges as the Hindustan Lever's acquisition deal disappointed the company's shareholders, and common investors. On the other hand, Unilever companies, Hindustan Lever and Pond's - which have planned to acquire Lakme brands and units lock, stock and barrel - shot up on the exchanges.

Lakme - which was managed by Simone Tata - fell by Rs 27.90 to Rs 252 on the Bombay Stock Exchange (BSE) amidst heavy selling pressure by investors. The scrip plunged on the National Stock Exchange too. The bull liquidation in Lakme shares began at a time when the entire stock market turned bullish and Sensex gained 80 points on Friday.

On the other hand, the acquirer HLL shot up by Rs 118.25 to Rs 1,501.25 and Pond's by Rs 43.75 to Rs 1,065.75 on the BSE. "These two companies will benefit the most from the Lakme takeover and merger. This is the reason for a rise in demand for their shares on the market," said a broker.

"After the deal withHindustan Lever, Lakme is left without any business. I don't know how I will benefit as a shareholder. The company was always known for its cosmetic and personal products. I'm not clear why the Tatas sold Lakme brands and units," said an investor who has been holding Lakme shares for the last 10 years. Simone Tata, the chairperson of the joint venture, had told shareholders in August last year that Lever would not take over the company. The AGM followed soon after the company had sold out its other major business, pharmaceuticals. This, Simone Tata had said to assure some perturbed shareholders who feared that HL would one day takeover Lakme. The buy out decision comes soon after Lakme unveiled a new corporate identity.

The exit of the Tatas from the cosmetic segment is under the group chairman Ratan Tata's plan to get out of all non-core areas. "It's not clear on what basis they have identified the so-called core and non-core areas. I don't know why should I keep my shares in Lakme which is now leftwithout any brand or manufacturing unit. The management has not announced any new business plan," said another broker. "I have been taken for a ride by the Lakme's announcement that the creation of Lakme-Lever and Lakme Brands will help the small shareholders," said another, pointing out the plunge in share prices.

HLL is buying out the 50 per cent stake of Tatas in its joint venture for cosmetics, Lakme Levers Ltd. It is also buying Lakme trade marks from Lakme Ltd's wholly-owned subsidiary, Lakme Brands. With this, the shareholders of Lakme are left with a shell company which has no plans, no brands and no manufacturing facilities. "The promoters have systematically stripped the company of its assets and brands," said an NSE broker.

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.


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