Tata Consumer Products announces reorganization of India and overseas business to simplify, align and synergize its business
- Minority interests to be consolidated at Tata Consumer Products. Proposals announced today include:
- Combining Tata Coffee’s business into Tata Consumer Products and its wholly owned subsidiary through a composite scheme of demerger and merger
- Purchase of minority interests in Tata Consumer Products UK through a preferential issue of equity shares
- Ownership consolidation to be an enabler for efficient future reorganization initiatives of the international business, expected to result in revenue and operational efficiencies and in material synergies, to accrue over the medium to long term after completion of all restructuring initiatives
- Beneficial for both Tata Consumer Products and Tata Coffee shareholders
Tata Consumer Products Limited (“TCPL”) today announced a reorganization plan in line with its strategic priority of unlocking synergies and efficiencies. This plan includes the demerger of plantation business of Tata Coffee Limited (“TCL”) into TCPL Beverages & Foods Limited (“TBFL”), a wholly owned subsidiary of TCPL and the merger of the remaining business of TCL, consisting of its extraction and branded coffee business with TCPL, with the demerger to happen as the first step and merger to happen as the immediate second step, both being proposed through a composite scheme of arrangement. Additionally, TCPL proposes to purchase the minority interest in its UK subsidiary, Tata Consumer Products UK Limited (“TCP UK”) by way of a share swap, through a preferential issue of its equity shares.
These actions further TCPL’s objective of creating a future ready organization and will act as a stepping-stone for further simplification. These will also result in operational efficiencies, faster decision making and execution, creation of focused business verticals and unlocking of potential synergies. The consolidated actions outlined here are expected to generate material revenue, cost and other synergies over medium to long term, following the completion of the proposed transactions and future simplification initiatives, which will be undertaken following the receipt of requisite approvals and processes.
Composite Scheme of Arrangement
The Boards of Directors of Tata Consumer Products Limited and Tata Coffee Limited, at their respective meetings held on March 29, 2022, have approved the combination of plantation business of TCL with TBFL and non-plantation business with TCPL through a composite scheme of arrangement for demerger and merger (“Scheme”). This will enable the consolidation and 100% ownership of the branded, extractions & plantations business of TCL into TCPL and its wholly owned subsidiary.
On effectiveness of the Scheme, the shareholders of TCL (other than TCPL) as on the record date will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL, through the issuance of:
- 1 equity share of TCPL for every 22 equity shares of TCL, in consideration for the demerger (as per the approved share entitlement ratio); and
- 14 equity shares of TCPL for every 55 equity shares of TCL, in consideration for the merger (as per the approved share exchange ratio).
Through this transaction, TCL shareholders will get access to multiple growth engines and participation in a larger and fast growing FMCG business. TCPL shareholders are expected to benefit from better synergies and business efficiencies going forward.
The Scheme is subject to the necessary statutory and regulatory approvals including approvals of the respective benches of NCLT, the stock exchanges, SEBI and the respective shareholders of each of the companies.
Consolidation of Interest in TCP UK
The Board of Directors of TCPL at their meeting have also approved the purchase of 10.15% minority interest in its UK subsidiary, TCP UK, from Tata Enterprise (Overseas) AG, Switzerland (TEO). As consideration, TCPL will issue 74,59,935 equity shares i.e. 0.80% stake (computed on post preferential issue basis) to TEO, by way of preferential issue in accordance with the applicable regulations.
This transaction is subject to TCPL shareholders’ approval and other regulatory approvals, as may be required under applicable law.
The above transactions will result in TCPL having 100% ownership of the business of TCL and of TCP UK, which will be an enabler for efficient reorganization initiatives of its international business. The above transactions, along with future reorganization, will help unlock value for both TCPL and TCL shareholders who are expected to benefit from the resulting efficiencies and operational, administrative and financial synergies.
Commenting on the announcements, Sunil D’Souza, MD & CEO, Tata Consumer Products said “The restructuring initiative is in line with Tata Consumer Products’ strategic priorities - to unlock synergies and create a future ready organization. This exercise will enable us to better leverage our supply chain, create customer focused business verticals, and accelerate decision making & execution. This will be a stepping-stone for further simplification initiatives with a view to achieving recurring operational, administrative and financial synergies. We are confident that this will create significant value for all our stakeholders.”
Chacko Thomas, MD & CEO, Tata Coffee said “This reorganization exercise will enable Tata Coffee to better leverage the strong coffee expertise we have and allow us to integrate more closely with TCPL’s branded coffee business, to propel it further. Combining our extractions business with TCPL’s tea extractions business will help us to strengthen our product offerings and unlock market potential by widening the portfolio and geographic reach. Overall, we believe this transaction will give TCL shareholders an opportunity to benefit from a much larger and faster-growing integrated F&B business under the aegis of TCPL”
Statements in this press release describing TCPL’s performance may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those directly or indirectly expressed, inferred or implied. Important factors that could make a difference to the TCPL’s operations include, among others, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets in which TCPL operates, changes in or due to the environment, Government regulations, laws, statutes, judicial pronouncements and/ or other incidental factors.
Kotak Investment Banking is the financial advisor and fairness opinion provider to TCPL for the Scheme. ICICI Securities is the fairness opinion provider to TCL for the Scheme. PwC Business Consulting Services LLP and SSPA & Co. are valuers for the Scheme and have recommended the share entitlement ratio and the share exchange ratio. KPMG is the tax advisor and Cyril Amarchand Mangaldas is the legal advisor for the transaction.
About Tata Consumer Products Limited
Tata Consumer Products Limited is a focused consumer products company uniting the principal food and beverage interests of the Tata Group under one umbrella. The Company’s portfolio of products includes tea, coffee, water, RTD, salt, pulses, spices, ready-to-cook and ready-to-eat offerings, breakfast cereals, snacks and mini meals. Tata Consumer Products is the 2nd largest branded tea company in the world. Its key beverage brands include Tata Tea, Tetley, Eight O’Clock Coffee, Tata Coffee Grand, Himalayan Natural Mineral Water, Tata Water Plus and Tata Gluco Plus. Its foods portfolio includes brands such as Tata Salt, Tata Sampann, Tata Soulfull and Tata Q. In India, Tata Consumer Products has a reach of over 200 million households, giving it an unparalleled ability to leverage the Tata brand in consumer products. The Company has an annual turnover of ~Rs. 11,600 cr with operations in India and International markets.
For more information on the Company, please visit our website www.tataconsumer.com
About Tata Coffee Limited
Tata Coffee Limited (TCL) is a subsidiary of Tata Consumer Products Limited (TCPL) with 57.48% of TCL’s equity share capital held by TCPL. Tata Coffee holds the majority stake in the Eight O’ Clock Coffee business, the 4th largest Roast & Ground coffee brand is the USA. Tata Coffee is one of the largest integrated coffee companies as well as one of the largest exporters of Instant Coffee in Asia. Its business span Coffee including Pepper and Tea plantations and instant coffee/extractions business in India and Vietnam. It also has roast and ground facilities for ‘Tata Coffee Grand’ which is marketed by TCPL.The Company produces between 8,000 - 10,000 MT of shade grown Arabica and Robusta Coffee at its estates in South India. Its estates are certified by three agencies: UTZ, Rainforest Alliance and SA 8000 reaffirming its commitment to the people and the environment. The Company’s two Instant Coffee manufacturing facilities in India have a combined installed capacity of 8,400 MT and its state- of- the- art Freeze Dried Instant Coffee manufacturing facility in Vietnam has a capacity of 5000 MT per annum.
For more information on the Company, please visit our website www.tatacoffee.com