Ending months of speculation, Tata Tea today announced the intent to acquire management control of Mount Everest Mineral Water (MEMW) Company, owners of the Himalayan brand of bottled water.
The company has entered into a definitive agreement to buy 10.74 per cent shares from the promoters of MEMW and subscribe to a preferential share offer of 15 per cent of the company's capital.
The Tata Tea board will also announce an open offer soon to acquire up to an additional 20 per cent equity in MEMW at a price of Rs 140, in accordance with takeover regulations.
At present, the Himalayan brand is largely a player in the institutional sales segment and controls roughly 75 per cent of the natural water market, said company executives. Himalayan's is believed to be natural mineral water on the lines of that bottled at source brands like Danone's Evian, as opposed to other bottled water brands like Bisleri, Aquafina or Kinley.
Announcing the acquisition, Percy Siganporia, MD, Tata Tea said, "There is tremendous growth potential in the global market for value-added water. The Himalayan acquisition will enable us to tap these opportunities effectively while building a global presence in the vertical."
Tata Tea will incur a debt of Rs 210 crore on its books after the Himalayan acquisition is completed, said L Krishnakumar, CFO, Tata Tea. Of this, the company will incur a cost of Rs 100 crore on the open offer and an additional Rs 110 crore on the stake acquisition and preferential offer. Merrill Lynch will manage the open offer.
The immediate plans for the Himalayan brand include expanding its presence in the Indian retail segment.
The experience from the Glaceau acquisition—a stake that Tata Tea sold to Coca-Cola late last month—will also help Tata Tea get into other related water categories, said company executives.
Tata Tea has also set up a separate task force to manage its bottled water business. The taskforce will be headed by Pradeep Poddar, former managing director of Heinz India, as CEO of the new business.
