Mumbai: Tata Tea will buy almost 26% of Mount Everest Mineral Water Ltd and make an open offer for another 20% in a deal that the company said was worth up to Rs210 crore.
Tata Tea Ltd announced the deal a week after it said it was selling its 30% stake in US vitamin water maker Glaceau to Coca Cola Co. for $1.2 billion. Tata Tea said it would buy its stake in Mount Everest which makes the Himalayan brand of water through a preference issue of shares and a purchase of shares from the firm’s owners at Rs140 a share. The company’s open offer, required under Indian law is also at Rs140 a share. Tata Tea would fund the deal through borrowings, said its chief financial officer L. Krishna Kumar. And the company’s managing director Percy Siganporia added that Tata Tea did not have any plans to delist Mount Everest. The offer represents a 6.5% premium over Mount Everest’s closing share price of Rs131.50 on the Bombay Stock Exchange (BSE).
Earlier, ahead of the announcement, Tata Tea’s shares closed at Rs952.30 on BSE, up 3.4%. They have gained 32% this year.
“Water is the most valuable and fastest-growing sector in the beverages space,” said Nikhil Vora, vice president of SSKI Securities before the deal was announced.
Market leader Parle Bisleri Ltd says sales surged more than 20 times in a 10-year period ended 2006. “Demand for bottled water is rising in cities because of inadequate supplies from utilities,” said Arun Kejriwal, director at research firm KRIS before the announcement.
Tata Tea also announced its results for the January-March quarter and 2006-07. Its FY07 standalone (without considering subsidiaries) net profit rose 63.6% to Rs306 crore, while its consolidated net profit was up 48.2% to Rs443 crore. For the full year, the company’s consolidated revenue was Rs4,103 crore, an increase of 30.2% over last year. On a standalone basis, however, Tata Tea’s fourth quarter net profit was down to Rs3.9 crore from Rs19.3 crore in the fourth quarter of 2005-06.
Since 2000, Tata Tea has spent $1.3 billion (Rs5,330 cr) buying producers of speciality tea and coffee.
(Debarati Roy of Bloomberg contributed to this story)