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December 13, 2006

INDIA: Strained relations between Danone and partner in Britannia JV

Relations have become strained between Danone and its joint venture partner in Indian food processing company, Britannia Indusrties, whose product range includes biscuits, breads and cakes.

Relations have become strained between Danone and its joint venture partner in Indian food processing company, Britannia Indusrties, whose product range includes biscuits, breads and cakes. 

The JV dates back to 1990 with Danone holding a 50.95% stake in Britannia with India’s Wadia group controlling the remaining 49.05% of the company’s capital.

Last week, Wadia instigated legal proceedings following the acquisition by Danone on 1 December of a 4.6 % stake in Indian biotech company Avesthagen. Wadia claimed that the investment was in breach of the terms of its JV agreement with Danone.

A spokeswoman for Danone told just-food the company had countered the claim in court, arguing that the agreement stipulates that only investments for manufacturing and marketing of food and beverages in India are to be proposed to Britannia. Wadia’s complaint was subsequently rejected but the group has since appealed and a court decision is expected at the end of next month.

Last month, the absence of earnings results from Britannia Industries in Danone’s third quarter figures raised questions in the Indian press that all was not well between the two parties. There were reports that Britannia has refused to share earnings due to corporate governance issues, while Danone said the omission was a result of stock market regulations.

The spokeswoman declined to comment on speculation that Danone was now preparing to pull out of the JV and buy out Wadia’s stake in Britannia.  

“We are not commenting beyond the statement we have made on the acquisition of the minority stake in Avesthagen, which makes it very clear that no breach of the agreement has taken place.”

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