Mumbai, Sept 10: Hershey’s, the $ 6 billion US chocolate maker, will go it alone in India.

On Monday, The Hershey Company acquired the 43 per cent stake that Godrej Industries held in a joint venture that the two partners had formed in 2007. The size of the deal wasn’t announced.

The Pennsylvania-based company said it would assume $ 48 million of debt on the books of Godrej Hershey and acquire its manufacturing facilities.

The joint venture was set up in May 2007 with Godrej Beverages and Foods Ltd, a Godrej group company, to manufacture and distribute confectionery products, snacks and beverages across India. Hershey held a 51 per cent controlling interest in Godrej Hershey Ltd.

In June 2010, Hershey executed a rights agreement with Godrej Hershey Ltd in the form of unsecured compulsorily and fully convertible debentures. At that time, Hershey had stumped up $ 11.1 million while the “non-controlling interests” in Godrej Hershey Ltd, which included the Godrej group, contributed $ 9.3 million.

Hershey’s is the largest producer of quality chocolates in North America. It lists India as one of its focus markets outside the US along with Mexico, Brazil, and China. Overseas operations accounted for 15.6 per cent of Hershey’s total consolidated net sales in 2011.

The brands sold by Godrej Hershey include Hershey chocolates, confectioneries like Mahalacto and beverages like Jumpin, Xs and Sofit, India’s first soya milk drink.

Nutrine Confectionery company, which was acquired by Godrej in 2006, forms a major portfolio for Godrej Hershey. The Nutrine portfolio consists of brands like Maha Lacto, Maha Choco, Nutrine Eclairs, Aasay, Kokanaka and Honeyfab in the hard candy and éclairs.

In a press statement issued today, Godrej Industries said the transaction was likely to close by the end of this quarter. Once completed, Godrej Hershey will become a wholly-owned subsidiary of the Hershey Company.

The buyout of the Godrej stake will see Hershey squaring off against established giants players like Nestle and Kraft Foods Inc in the Indian market.

Godrej Industries said the stake sale was part of its effort to concentrate on its core business.

“Over the last few years, we have been following a disciplined approach to doubling down on our core businesses to drive sustained and profitable growth. We have been making clear choices to focus on areas where we have a competitive advantage and that provide the best growth opportunities for us. Our decision to divest our stake in the Godrej Hershey joint venture is in line with this focused portfolio strategy,” said Adi Godrej, chairman of the Godrej group.

However, the annual report of The Hershey Company for 2011 suggests another reason that might have hastened the stake sale.

“We completed an impairment evaluation of goodwill and other intangible assets of Godrej Hershey Ltd during the second quarter of 2010. As a result of reduced expectations for future cash flows from lower than expected profitability, we determined that the carrying amount of Godrej Hershey Ltd exceeded its fair value. We recorded a non-cash goodwill impairment charge of $44.7 million in the second quarter of 2010 to reduce the carrying value of Godrej Hershey Ltd to its fair value, including a reduction to reflect the share of the charge associated with the non-controlling interests. There was no tax benefit associated with this charge,” the Hershey annual report said.

The impairment charge seems to have been recorded soon after Hershey and the Godrej group pumped money into the company’s debentures.

Hershey has brands like Kit Kat, Twizzlers, Reese’s, Hershey’s Kisses, Almond Joy in its portfolio. It may decide to widen its brand portfolio in India.

For the fiscal year ended March 31, 2012, Godrej Hershey Ltd had reported net sales of Rs 386 crore and losses of Rs 74 crore.

Over the past few months, there has been a lot of speculation that Hershey’s and the Godrej group would dissolve their partnership. Hershey was reportedly keen on going it alone in the Indian market.

In August this year, the board of GIL had decided to explore various possibilities for restructuring Godrej Hershey Ltd which, it said, was “potentially sick”. The board then said it was looking at various possibilities for restructuring its shareholding in Godrej Hershey Ltd that included referring the joint venture to the Board for Industrial and Financial Restructuring (BIFR) and/or sale of its stake in the company.

This is not the first time that the Godrej has snapped ties with a foreign partner. In 2010, Godrej Consumer Products acquired Sara Lee’s 51 per cent stake in their joint venture, Godrej Sara Lee, for over Rs 1,000 crore. The partnership was dissolved after Sara Lee sold its global personal care business in order to focus on the food business. Earlier in 2001, the group pulled out from Godrej Pillsbury, another joint venture.