Maliban, Hemas explore strategic alliance

Stock market analysts said however that unless HHL opts for a stake at Maliban, it may not do too much to enhance its value.

Maliban Biscuit Manufactories Ltd and Hemas Holdings Ltd (HHL) on Monday announced that both companies are exploring the possibilities of a strategic alliance – confirming an exclusive report in The Sunday FT the previous day.

Stock market analysts said however that unless HHL opts for a stake at Maliban, it may not do too much to enhance its value.

“The possible future alliance is being discussed with a view to further enhancing the Maliban brand equity and boosting the distribution of Maliban products, both in Sri Lanka and Overseas,” a joint communiqué by the two companies to the Stock Exchange said, a day after The Sunday Times broke the news.

A stockbroker said that it is yet unclear about the ‘value addition’ HHL will achieve if they acquire the distribution arm of Maliban as was widely speculated.

“Hemas has its own very good distribution channels, which can distribute to anywhere in Sri Lanka, but biscuits are slightly different to the personal care segment that they are involved in,” a stock market analyst said.

A stockbroker said that HHL during the last few years has been trying to consciously move into the food and beverage (F & B) segment of the fast moving consumer goods (FMCG) sector and acquiring Maliban’s distribution arm may be one such effort.

“They got into items such as ‘Rockers’ and they are trying to get into the confectionery market as well. As such Maliban will be a good synergy,” he said.

However, some question the proposed strategic alliance. “Distribution is a low margin business. Hemas gave up their Proctor and Gamble distribution some years ago and it is doubtful whether they only want the distribution arm of Maliban,” a stock analyst said.