Mcleod’s buying a UK firm’s Ugandan tea estates

Mcleod’s buying a UK firm’s Ugandan tea estates

Mumbai/Kolkata: McLeod Russel Ltd said on Wednesday its unit Borelli Tea Holdings Ltd has signed a share purchase agreement with UK firms James Finlay Ltd and James Finlay International Ltd for acquiring a Ugandan tea firm.

Borelli will pay $25 million initially and then make a further payment of $5 million for debt repayment for Ugandan firm Rwenzori Tea Investments Ltd, it said in a statement to the exchange.

The transaction is scheduled to be completed on 15 January, 2010, it added.

Borelli would fund the deal through debt of $15 million, while McLeod would part-finance the deal through internal accruals, Aditya Khaitan, managing director, McLeod Russel, told reporters in Kolkata.

In calender 2008, Rwenzori posted a net profit of $5 million on sales of $24.5 million. It is expected to post a profit of $7 million on a turnover of $30 million in 2009, Khaitan said.

The Ugandan firm currently produces 15 million kg of black tea. It is expected to rise to 20 million kg in next three years, he said.

“We could offer value-added tea in form of blends through this acquisition to our overseas buyers in Pakistan, Egypt and UK," Khaitan said.

McLeod’s total output would rise to 97 million kg following the acquisition, of which it hopes to export 48 million kg.

Ahead of the news, McLeod shares ended up 1.56% at Rs261.10s in the Mumbai market that ended up 3.23%.