Business Daily from THE HINDU group of publications
Monday, Jun 26, 2006
Business Daily from THE HINDU group of publications Monday, Jun 26, 2006 |
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Overseas Investments Corporate - Mergers & Acquisitions Agri-Biz & Commodities - Coffee Tata Coffee to buy US company Our Bureau
Bangalore , June 25 Tata Coffee Ltd has signed an agreement for acquisition of Eight O'Clock Coffee (EOC) Company of the US from private equity firm, Gryphon Investors, for a total price of Rs 1,015 crore or $220 million.
Acquisition details
This is the largest acquisition by Tata Coffee, which is a 51-per cent owned by Tata Tea Ltd. An official release on Sunday said that the acquisition would be funded through a combination of equity and non-recourse debt. Non-recourse implied that the entire borrowing was on a stand-alone basis. The advisor for the acquisition was J.P. Morgan. The acquisition cost is more than the net worth of Tata Coffee as on March 2006. As on March FY '06, Tata Coffee's paid-up equity was Rs 12.47 crore and the net worth was Rs 186 crore.
Changing flavour
The acquisition provides Tata Coffee a substantial beachhead into the $21-billion US coffee market. Headquartered in Montvale, New Jersey, EOC is the third largest coffee brand by volume behind Folgers and Maxwell House. EOC enjoys a 67 per cent penetration of the US retail coffee market. EOC had net sales of $109 million (Rs 505 crore). The company had an earnings before interest, tax, depreciation and amortisation of $27 million (Rs 125 crore).
Going global
The acquisition was expected to transform Tata Coffee from a regional player to a significant global player. It would also allow the company to become a fully integrated player in the global coffee industry. With the acquisition of EOC, Tata Coffee would have significant scale in important markets in Asia, Europe and North America. Tata Tea, the parent company of Tata Coffee, had recently acquired Tetley, Good Earth in the US and JEMCA in Czech Republic.
Related Stories: More Stories on : Overseas Investments | Mergers & Acquisitions | Coffee
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