The Boards of Directors at Tata Global Beverages Ltd (TGBL) and Tata Chemicals Ltd (TCL) have approved the de-merger of the Consumer Products Business of TCL into TGBL, in order to create value “for all shareholders through greater scale and synergies”, the group announced in a statement.

 

The move will combine key brands such as ‘Tata Salt’, ‘Tata Tea’, ‘Tata Sampann’ and ‘Tetley’ under a single umbrella – and those brands under the combined entity will reach over 200 million households, offering the new company an unparalleled ability to leverage the Tata brand in the consumer products segment.

 

The combined consumer business will also benefit from a broader portfolio to deepen distribution, alongside enhanced innovation capabilities, as well as a strong product pipeline. In addition, the new consumer entity expects to achieve substantial revenue and cost synergies, which will add value to its shareholders. 

 

Each shareholder of TCL will get 1.14 new equity shares of TGBL for every one equity share held in TCL (e.g., a shareholder holding 100 shares in TCL will receive 114 shares in TGBL). The respective Boards have approved the Entitlement Ratio based on the recommendations of independent valuers.

 

According to the Group, the proposed transaction will create a focused Consumer Products Company with a combined turnover and EBITDA of Rs. 9,099 crore (nearly US$1.3bn) and Rs. 1,154 crore (over US$164m) respectively, for the 12-month period ending 31st March 2019 on a proforma basis. The transaction is expected to be completed by Q4 FY20 / Q1 FY21.

 

“A strong growth platform”

 

Commenting on the announcement, Mr N Chandrasekaran, Chairman, Tata Sons said the new company would consolidate the Group’s current presence in food & beverages within the rapidly expanding consumer sector. “Through this combination, we have created a strong growth platform to meet the growing aspirations of Indian consumers”, he added.

 

Mr Ajoy Misra, Managing Director and CEO of TGBL, added that the transaction was consistent with his firm’s strategy to deepen its India presence and transform into a broader FMCG player. “Existing TGBL shareholders will benefit significantly as the Consumer Products Business increases our exposure to high growth product categories and provides a strong platform to seize new opportunities in this sector,” he enthused. “We will also continue to nurture and grow our global brands.”

 

Mr R Mukundan, Managing Director and CEO of Tata Chemicals, observed that the two companies combining provides significant benefits to shareholders by “unlocking the value” of TCL’s Consumer Products Business. “In line with its strategy to be a leading science-based solutions company, Tata Chemicals will aggressively grow its Specialty Chemistry business in the areas of Agro-Science, Nutrition Science, Material Science, and Energy Storage Science,” he advised. “In addition, the Basic Chemistry Business of Tata Chemicals will be the Global Partner of Choice for Soda Ash, Salt, and Bicarbonate to leading brands of Food, Pharma, Detergents and Glass.”