The proposed acquisition:
As part of Tata Tea’s strategic intent to rely less heavily on black tea revenues and position itself to benefit from the growing convergence between the tea beverages business and other beverage segments, Tata Tea and the Tata Group have recently acquired a 30% equity stake (the “Acquisition”) in Energy Brands Inc. (“Energy Brands”) for an overall consideration of USD677m. Energy Brands is a “new age”beverage company that was formed in 1996 and is engaged in the branding and marketing of enhanced water. It is one of the fastest growing beverage companies in the USA(CY2005 revenue growth of 89% and sales of USD176m). Of the 30% shareholding acquired in Energy Brands, 25% (“the Tetley Percentage”) has been acquired by a 100% subsidiary of TTGB, Tata Tea (GB) Investments. The Tetley Percentage has been financed by a mixture of debt and equity raised at TTGB level and through a limited recourse ring-fenced loan raised in Tata Tea (GB) Investments. The remaining 5% equity stake (“the TS percentage”) has been acquired by Tata Limited, a 100% subsidiary of Tata Sons The company
Tata Tea and Tata Tea (GB):
In March 2000, Tata Tea Limited (“Tata Tea”) acquired The Tetley Group Ltd for £271m through its UK subsidiary Tata Tea (GB) Limited (“TTGB” or “Tetley” or the “Borrower”), representing what was then the largest cross-border acquisition by an Indian company. Acquisition finance on the Tetley balance sheet at the time of £205m represented 5.1 times the proforma FY2000 EBITDA. Tetley has performed steadily since its acquisition by Tata Tea and has undergone two refinancings. By April 2006, Tetley had significantly reduced its leverage level (as represented by the Total debt/EBITDA ratio) to 3.57. Tata Tea, the majority shareholder in TTGB, is one of the largest dedicated vertically integrated tea companies in the world. It is part of the Tata Group, one of India’s foremost industrial conglomerates, which has interests in over 90 companies and is active in a number of business sectors from chemicals to consumer products. The Tata Group has annual total sales of Rs.967 billion (USD22.0bn).
The Tata Tea Group with its Tata and Tetley brands is the second largest branded tea business in the world behind Unilever Plc, with its Lipton and PG Tips brands. The majority of TTGB group sales and earnings are derived from the UK, where Tetley is the clear market leader of the tea bag market for black tea, with a market share of 28% by volume for the year 2006, representing a 7% increase in market share by value since 2000. Tetley is one of the UK’s leading food and drink brands and therefore a “must stock” item for supermarket retailers. TTGB blends, packs, markets and distributes tea products, principally in the UK, producing over 12 billion tea bags per annum. It also operates internationally in Canada, US, Australia, the Czech Republic, Russia, Poland, South Africa, Pakistan and Bangladesh and exports to more than 30 other countries.
GBP 104.5 mGBP14.9 m GBP 14.9 m USD 194.4 m USD 27.8 m USD 27.8 m Total Equity Contributed by shareholders GBP 134.4 m Tetley Loan USD 250.0 m
GBP 284 m
USD 538.8 m
TTGB Equity Investment GBP 233.7 m USD 434.5 mUSD 564 m for a 25% equity stakeUSD 113 m for a 5% equity
|Tata Tea (GB) Investments Limited |A 100% subsidiary of Tata Tea GB that will acquire a 25% equity stake in Energy Brands |
The Management projections derived from the Review of Business Plan EBITDA which incorporates the Latest Estimates (“LE”) for FY2006/07 and forecasts for the remaining...