“The decision to demerge is subject to approval of the Board and the shareholders to the scheme of demerger to be placed before the board early next year. The Board considered different modes of separation of the ice cream business and after due consideration, with a view to maximise value for all the shareholders, the board has accorded in-principle approval to demerge the business,” the company said.
Shareholders will receive shares in the new entity in proportion to their shareholding in HUL, the statement added.
“A separate listed entity will unlock fair value for HUL shareholders and give them the flexibility
to stay invested in ice cream’s growth journey,” Hindustan Unilever said in the statement.
The HUL demerger is subject to approval of the board and the shareholders, and the scheme will be placed before the board early next year. The board said it had considered different modes of separation of the ice cream business, and after due consideration, an in-principle nod was given to demerge the business, with a view to maximize value for all shareholders.
In September, HUL had set up a committee to evaluate the way forward for the business. Based on the recommendations of this panel, the board had announced the separation of the ice cream business in October.
After the September quarter earnings, HUL CEO Rohit Jawa too had mentioned about the two primary options before the company for separating the business – selling it, or demerging and listing it as a separate entity.
“These are both the options that the board is evaluating and the board has appointed an independent committee to review the way forward. The committee will work upon and then guided by committees’ reviews, the board will decide to mode of separation between these two lead options,” Jawa had said in October.
For HUL, the ice cream business is a high-growth segment with strong brands like Kwality
Wall’s, Cornetto and Magnum operating with ‘mid to high-single digit profitability’. The ice cream category has maintained its volume vis-à -vis last year, during the September quarter.
HUL CEO Rohit Jawa had in October said that both the brand and technology for the ice cream business is owned by Unilever. While Unilever has announced a separation of the ice cream business globally, HUL would have to spend money to develop local capabilities to run the business, if they decided to keep it in the portfolio.
The demerger will create a “leading listed ice cream company in India, which will have a
focused management with greater flexibility to deploy strategies suited to its distinctive business model and market dynamics,” HUL said.