Tata Tea close to $300 million European firm acquisition

Tata Tea, India’s largest packet tea company in terms of volume, is close to acquiring a beverage company in Europe for $300 million. The company has been on the look out for acquisitions to expand its reach to Europe where Tetley or Tata Tea do not have significant presence. However, details of the proposed acquisition are not yet known. When asked, Tata Tea responded by saying, “We do not comment on speculative forward looking queries.” For the past one year, the company has been trying to increase its presence in eastern Europe through acquisitions. The group last year bought the assets of a Czech-based tea company Jemca from Alima Znacková Potravina, a food processing company, for £12.4 million, and the trademarks of Vitax and Flosana this year from Premium Foods in Poland for £4.7 million. The Jemca acquisition was funded by The Tetley Group. It gave Tetley access to a low cost manufacturing facility in eastern Europe. Tata Tea currently is the second largest tea company in the world. Globally, the group’s branded tea market share was up nearly one per cent in Great Britain, Australia and Canada but fell marginally in the US and France. The recent sale of Energy Brands stake to the Coca Cola company, for nearly $1.2 billion, has also strengthened Tata Tea’s cash reserves which the company would be using for repaying existing debt and to invest in expansion across the globe. Last year, the company acquired 25 per cent shareholding in Energy Brands, commonly known as Galceau, for $677 million. For the year-ended March 2007, the interest on borrowings for acquisitions for the Tata Tea group stood at Rs 166 crore. Other acquisitions made by the group in the last year include Eight O’ Clock Coffee Company (EOC), USA from Gryphon Investors for $220 million (Rs 1,015 crore) and Joekels of South Africa for of £0.9 million. The group’s turnover stood at Rs 4,045 crore, out of which Rs 558 crore was on account of the Jemca, Good Earth and Eight O’ Clock Coffee acquisitions. The biggest contributor to its turnover is Great Britain, which contributes 33 per cent, followed by India with 25 per cent, the US and Canada with 29 per cent. Source: Business Standard Reporter / Mumbai December 21, 2007