Tata Coffee to merge with Tata Consumer
The merged entity will simplify structure, draw synergies
Bengaluru: Tata Consumer Products (TCPL) on Tuesday announced the merger of all businesses of Bengaluru-headquartered Tata Coffee with itself as part of a reorganisation plan to unlock synergies and efficiencies.
Under these plans of merger, while the plantation business of Tata Coffee Ltd (TCL) will be demerged into TCPL's wholly-owned arm TCPL Beverages and Foods Ltd (TBFL); the remaining business of Tata Coffee, comprising extraction and branded coffee business, will be merged with TCPL, the company said in a statement.
According to the merger plan, shareholders of TCL will receive an aggregate of three equity shares of TCPL for every 10 equity shares held by them in TCL.
Commenting on the development, TCPL MD & CEO, Sunil D'Souza said, "The restructuring initiative is in line with TCPL's strategic priorities - to unlock synergies and create a future-ready organisation."
"This exercise will enable us to better leverage our supply chain, create customer-focused business verticals, and accelerate decision making and execution," he added.
The merger process will be completed in 12-14 months to implement according to the management. "The merger will result in 5-10 per cent increment in net profit over 12-24 months due to management and operational cost synergies, tax offsets and dividend repatriation, reduction in the number of legal entities from 45 to 23- 25.
TCPL also plans to undertake further reorganisation initiatives in international business to simplify and synergise the business structure," said Edelweiss in a brokerage report.
TCPL has two steady base businesses—salt and tea—with market leaderships and potential for sustaining high single-digit to low double-digit growth in revenue. Its newer businesses, namely pulses and spices, are small but represent plays on large categories with huge room for growth, the report added.
"This merger will further aid in unlocking synergies and creating a more simplified structure but will have to wait for more details before building-in the synergy benefits," the report said.
Meanwhile, the shares of TCL rallied over 9 per cent on Wednesday after TCPL's announcement of the merger of all businesses of the company with itself as part of a reorganisation plan. TCL shares zoomed 9.32 per cent to settle at Rs 214.55 apiece on the BSE.
The stock of TCPL also gained 3.05 per cent to settle at Rs 765.95 apiece. During the day, it rallied 5.28 per cent to Rs 782.50.
