Coca-Cola buying US co for $4.1 b; Tatas get $1.2 b for 30% stake

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MumbaiMay 25Tata Tea has agreed to sell its 30 per cent equity stake in the US-based Energy Brands Inc which owns the Glaceau brands of beverages to Coca-Cola for $1.2 billion, pocketing a neat profit of about $523 million (about Rs 2,106 crore) in less than a year of its acquisition.

The deal follows Coca-Cola's decision to acquire the US company for $4.1 billion.

Tata Tea, through its indirect UK subsidiary, Tata Tea (GB) Investments Ltd, had picked up 30 per cent stake in Glaceau in August last year for $677 million, based on an enterprise valuation of $2.2 billion for the US company.

Coca-Cola, which had been eying Glaceau for quite some time, on Friday announced that it has reached an agreement to acquire the company and its full range of enhanced water brands for $4.1 billion in cash, including Tata's minority holding.

`Conditional' nod

Tata Tea said it has `conditionally' agreed to sell its shares by the end of the year for $1.2 billion, which is subject to adjustment for certain transaction and other costs.

The consideration reflects an underlying enterprise value of $4.2 billion for Glaceau, the company said in a notice to the stock exchanges. Tatas decided to exit Glaceau as they did not wish to remain as a minority partner with Coca-Cola.

In a tele-conference with the media, Mr R.K. Krishna Kumar, Tata Tea's Vice-Chairman, unequivocally said that it was not selling its stake in Glaceau under any pressure and that the move was purely a strategic financial decision.

Tate Tea shares closed at Rs 913.63 on the BSE on Friday, up by 3.98 per cent from the previous close of Rs 878.70. In the last week, the company's shares rose by 8.45 per cent.

He said the capital gains that the company expected to make out of the sale would be used to either make Tetley Tea debt-free or make other acquisitions across various geographies.

Open to more buys

He made it clear that even after the exit from Glaceau, Tata Tea's US plans remained unchanged. "We are open to buying companies that fit our architecture," he said.

In fact, the Glaceau stake acquisition was intended to be the platform for Tata Tea to expand its footprint in the US market, with the company even considering increasing its holding at one stage.

Replying to a question, Mr Krishna Kumar said the company's future acquisitions would focus on buying only majority stakes.

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(This article was published in the Business Line print edition dated May 26, 2007)
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