Mumbai, Dec 9: Ratan Tata's dream of making his Rs 33,000-crore conglomeratea true Indian transnational has moved a step closer towards reality. Theprice for the group's proposed acquisition of the UK-based Tetley hasfinally been fixed at £270 million (approximately Rs 1,900 crore) same asits initial bid price for the world's second-largest tea company.The acquisition will be through an all-cash deal with the entire amountbeing paid upfront, but it could not be ascertained at this stage whetherTata Tea will be taking up the entire liability on its books or whetherother group companies will share the same.The final agreement, which will make it the largest-ever acquisition by anyIndian company, is expected to be inked by end-January or latest by earlyFebruary, sources close to the deal said. Tata Tea will be taking control ofonly Tetley's tea business, and without its coffee brands.
A Tata group spokesperson said: "It will not be appropriate for us tocomment on the deal now."
The price has finally been struck after over six months of protractednegotiations with Tetley's current owners, Schroders Private Equity Fund andPrudential. Talks had almost reached a deadlock in the interim over theprice issue.
Tata Tea had earlier put in an initial bid of £270 million for the UK-basedcompany, far higher than its closest rival Sara Lee of the US which hadoffered £200 million. On the insistence of Tetley's owners, Tatas had raisedthe bid price by another £10 million against the asking price of £300million. The final £270 million at which the deal will be struck does notinclude the coffee business of Tetley, which has strong presence only inNorth America.
The acquisition will give the Tatas an immediate market reach into thematured markets of North America, Europe and Australia which, over the longterm, could be leveraged to extend the group's other businesses in thesemarkets as well.
As per the original financing plan worked out by the Tatas, the deal was tobe part-funded by securitising future receivables of Tetley, while thebalance were to be through syndication of loans from the internationalmarket. Around £70 million were to be raised through the latter route.
Tata Tea, along with blending and packaging major Tetley, will be in aposition to take on the Unilever group, the largest player in the global teaindustry. Tata Tea has over 60 tea gardens in India and Sri Lanka, besidesits own blending and packaging units.
Tetley, on the other hand, buys tea from the major auction markets of theworld, and processes them to be sold under its own brands like Earl Grey,English Breakfast and Traditional Afternoon-in the US, Canada, the UK andAustralia.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.