Que.

1 Briefly discuss the product offering and operational activities of both HLL
& TOMCO

HINDUSTAN LEVER LIMITED

Indias largest FMCG anglo dutch company unilever owns a majority stake in HLL.

In 1888 with the export of sunlight soap, which was followed by lifebuoy in 1895
and other famous brands like pears, lux and vim soon after.
In 1931, HLL setup its first Indian subsidiary, Hindustan vanaspati manufacturing
company, followed by lever brothers India ltd. In 1933 and united traders ltd. In 1935.
three company merged in Nov. 1956 and made HLL.
Brooke bond & co. india ltd. Was formed. Unilever acquired brooke bond through
an international acquisition. Similarly, liptons link with india date back to 1898. HLL
acquired lipton in 1972 and 1977 lipton tea ltd was incorporate.
Ponds joined HLL through an international acquisation in 1986.
In 1992 HLL entered in dental product market by introducing pepsodent, mentadent
G etc.

TATA OIL MILLS COMPANY (TOMCO)

TOMCO Was the first Indian company founded in 1917.

TOMCO manufactured and sold products like soap, detergent, toiletries and animal
feeds.
TOMCO had more than 60,000 shareholders with the following break up : 22%
TATA group, 41% financial institution and 37% general public.
TOMCO merged with HLL effective from April 1,1993.
In aug.1992 TOMCO sold its holding in tata tea, tata press, tata chemical and titan
watches and earned a profit of Rs. 10cr.

Que. 2 Elaborate on the developments that led to the merger deal

between HLL & TOMCO.
TOMCO had not been doing well for sometime and was already looking for a
partner. As well as its least equipped player in the market, without any unique
competitive weapon.
In sep. 1992 HLL announced its intention to take over TOMCO. In early march
1993 lever pulled out all the stop and closed the deal over in just two days.
In which they proposed to offer the 2 share of HLL for every 15 share of TOMCO.

 TOMCO would cease to exist from 1 April, 1993. under the deal, it had been
decided that the HLL would not only TOMCO but also some of its subsidiaries.
They were tata vashishti detergent, a TOMCO joint venture with Maharashtra
petrochemicals, industrial perfumes, international fisheries, kaiyan soap industries a
joint venture with the west Bengal govt.
TOMCO investments in other subsidiaries and associate companies would be sold
back buy the levers to the tata at market value.
These include:
Tata export
Aftaab investment
Tata ceramics
Kerala,
Reactive material india

Que. 3 What are the benefits of this merger of HLL with TOMCO.
The merger would add 1,60,000 tonnes of soaps and detergents to HLL 6,00,000
tonnes, giving the merged entity a hold over indian market.
TOMCO was a very good buy for the HLL on 2 very important counts, i.e
complementary brands and manufacturing locations.
Levers best effort to straddle every soap and detergent market, there were still
segments it did not occupy. TOMCOs product more than just covered them.

 Hamam, TOMCOs bestseller with 15% of mkt share, moti, soap which sold as
much as pears filled the gap of an ethnic brand in levers premium soap portfolio: Lirin,
International Lux, and Le Sancy.
In the detergent mkt, Levers did not have a mid price bar, TOMCOs super 501
plugged the vacuum.
HLL had 29 manufacturing facilities all over the country but its south India was
weak which is filled by TOMCO in Kerala and Madras. So, that network of stockists
could very well double from the 3000,it had at that moment.
Overall HLL benefited from the detergent and soaps brand that plugged gap in its
own range.

Que. 4 Identify and explain the various difficulties and problems faced by HLL &
TOMCO.
When HLL announced its to takeover TOMCO, Nirma was also put as a counter bid of
Rs. 75 per share. The price was more attractive than HLL 2:15 share swap offer which
valued TOMCO share at Rs.52.
Both company faced some problem on legal grounds like:
Violation of section 393(1)(A) of the act not making the required disclosure in the
explanatory statement.
Valuation of share exchange ration was grossly loaded in HLL favour.
Ignoring the effect of provisions of MRTP act.
Interest of employees of both the companies were not adequately taken care of.
Preferential allotment of shares at less than mkt price to unilever which was not in
public interest.

SOME OTHER PROBLEMS LIKE:

Mr. Jajoo had questioned The justification of Swap ratio, i.e 2:15 and according to
Mr. dholakia, the ratio was entirely unsatisfactory and unfair to TOMCO shareholders.
In addition to it, he claimed that the BOD of TOMCO did not explain the scheme of
amalgamation in the explanatory statement circulated among the shareholder.
According to report the book value of equity shares of TOMCO as Rs. 57.58 per
share where as the book value of equity share of HLL ass on dec. 31, 1992 based on its
audited and printed balance sheet was only Rs.28.84 per share. The exchange ratio was
obviously unfair to the shareholders of TOMCO and report was produced before high
court for the first time.
On the other hand, it had been realised that the mkt price of HLL was Rs. 375 where
that of TOMCO was Rs. 52.50 as on June 17, 1993.
Mr. Jajoos argument for improper disclosure of material facts in the explanatory
statement was not shared by more than 99% of the shareholders.

 Another allegation was preferential allotment of shae at less than mkt price to
unilever which was not in public interest.
41% share of the TOMCO had not complained about the ratio, lack of notice and
lack of understanding.
It was argued on behalf of TOMCO employees that the scheme would fully
safeguarded the interest of employees by providing that the term and conditions of their
service would be continuous and uninterrupted and their services condition would not
be prejudicially affected by reasons of the scheme.
The grievance made, however, was that there was no job security of the employees.

Thank you