Tata Consumer Products Ltd (TCPL) has announced the merger of all businesses of Tata Coffee Ltd with itself as part of a reorganisation plan in line with its strategic priority of unlocking synergies and efficiencies.
While the plantation business of Tata Coffee Ltd (TCL) will be demerged into TCPL's wholly-owned arm TCPL Beverages & Foods Ltd (TBFL), the remaining business of TCL, consisting of its extraction and branded coffee business, will be merged with TCPL, the company said in a statement.
The demerger to happen as the first step and the merger to happen as the immediate second step, both being proposed through a composite scheme of arrangement.
Under the scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL. This will be carried out through the issuance of 1 equity share of TCPL for every 22 equity shares of TCL in consideration for the demerger. For the merger, 14 equity shares of TCPL will be issued for every 55 equity shares of TCL, it added.
"This will enable the consolidation and 100% ownership of the branded, extractions & plantations business of TCL into TCPL and its wholly-owned subsidiary," it said.
The Boards of Directors of TCPL and TCL, at their respective meetings held on Tuesday, have approved the combination of the plantation business of TCL with TBFL, it said.
TCPL further said it proposes to purchase the minority interest in its UK subsidiary, Tata Consumer Products UK Limited by way of a share swap, through a preferential issue of its equity shares.
"The transactions will result in TCPL having 100% ownership of the business of TCL and of TCP UK, which will be an enabler for efficient reorganisation initiatives of its international business," it said. As on December 2021, TCPL holds 57.48 per cent stake in TCL.
Commenting on the development, TCPL MD & CEO Sunil D’Souza said, "The restructuring initiative is in line with Tata Consumer Products’ strategic priorities - to unlock synergies and create a future-ready organization."He further said, "This exercise will enable us to better leverage our supply chain, create customer-focused business verticals, and accelerate decision making and execution."This will be a stepping-stone for further simplification initiatives with a view to achieving recurring operational, administrative and financial synergies, he said adding, "We are confident that this will create significant value for all our stakeholders".Tata Coffee MD & CEO Chacko Thomas 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.He further said, "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, Thomas said, "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."
After merging the consumer products business of Tata Chemicals with Tata Global Beverages, the company was renamed TCPL and now owns brands like TATA Salt, TATA Tea, Tetley, Eight O’ clock, Himalayan Water, Tata Water Plus and Tata Gluco Plus. Its foods portfolio includes brands such as Tata Salt, Tata Sampann, Tata Soulfull and Tata Q.
The Tata group firm aspires to be a formidable player in the FMCG category, by expanding its play into the existing category and venturing into new areas. TCPL has a reach of over 200 million households and has an annual turnover of Rs 11,600 crore with operations in India and International markets.