Khaitans to buy out Magor

Four years after the Khaitan-Magor split, the wheel has turned full circle -- McLeod Russel, Brij Mohan Khaitan's tea company, is set to buy out Magor-held Williamson Tea Assam.

According to the contours of the deal being worked out, McLeod Russel will acquire 70 per cent of Borelli Tea Holdings Ltd, UK, the holding company of Williamson Tea Assam.

The management of McLeod Russel was unavailable for comment. Industry sources said the acquisition would cost the Khaitans around Rs 146 crore (Rs 1.48 billion) at Rs 148 per share.

The Williamson Tea Assam scrip closed at Rs 146.70 on the Bombay Stock Exchange and Rs 147.05 on the National Stock Exchange on Friday.

The move will make the Brij Mohan Khaitan group the world's largest integrated bulk tea company with a production of 62 million kg, a status enjoyed by the group prior to its split.

Williamson Tea Assam has 17 tea gardens with a production of 20 million kg.

Incidentally, when the split was formally announced, Philip Magor in his official statement had said, "We are long-term buyers, not sellers."

Over the last four years, both the groups had untangled the cross-holdings among various companies and resolved brand and logo issues.

The two groups also reached an understanding on the use of the "Williamson" name and the elephant logo of the group, a creation of Philip Magor.

Earlier this year, the last of the cross-holdings was unravelled as the Khaitans bought out Magor's 27 per cent in Williamson Magor & Co, the holding company of the Brij Mohan Khaitan group.

Magor's company was originally known as George Williamson Assam but was later renamed Williamson Tea Assam.

The Khaitans undertook a major restructuring of their tea business as well after the split. The Khaitan's tea business, prior to the split, was vested in Bishnauth Tea Company and Eveready Industries India.

Subsequently, Bishnauth was merged into Eveready. Thereafter, the tea business was demerged from Eveready into McLeod Russel.

Industry sources said with two focused businesses, it would be easier for McLeod Russel to explore funding options for the buyout.

"McLeod Russel is now in a position to contemplate acquisitions," they said.

The move to expand the plantations business is contrary to recent developments in FMCG companies like Tata Tea and Hindustan Lever Ltd, which are selling plantations.