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Tata Tea on $1B shopping spree
By agencies
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Wednesday, 10 August 2005, 19:30 IST
MUMBAI: Tata Tea is set to sew up a global acquisition that can cost up to $1 billion, dwarfing its £271 million acquisition of Tetley in early 2000.
Elaborating on the company's plans, RK Krishna Kumar, vice-chairman of Tata Tea, said the company had put in place a two-forked acquisition strategy.
On the one hand, it was planning to take over a company along with its brand in North or South America. On the other, it was preparing to acquire mid-sized companies in the U.S. and Latin America, Krishna Kumar said. The acquisitions can happen over the next six months.
Krishna Kumar said the first acquisition (company and brand) would be larger than the Tetley buyout as the opportunities were bigger now and so were the company's ambitions.
Ratan Tata, chairman, Tata Tea, said the acquisition would be in the beverage space and that, flavored tea and herbal tea were possibilities. Tata Tea and Tetley will make the acquisition together.
Commenting on the financing options for the acquisition, Krishna Kumar said, there were many options available and the company would not "ring fence" the debt as was done in the case of Tetley. He said, raising foreign exchange had become very easy and raising resources in the domestic market would not be a problem either.
Responding to queries raised by shareholders, Tata said, cash available with the company would be used for acquisition and the company would build a war chest.
The Tetley acquisition, which was the biggest-ever cross-border acquisition by an Indian company at that point in time, was also the first leveraged buyout by any Indian company. The acquisition of Tetley made Tata Tea the second biggest tea company in the world after Unilever.