Mumbai: Tata Tea Ltd., the world's second-biggest branded tea company, will acquire nearly 26 per cent stake in Mount Everest Mineral Water Ltd in a deal worth Rs210 crore ($52 million). Tata Tea will also make an open offer for another 20 per cent in the company.
Mount Everest makes the Himalayan brand of bottled water.
Tata Tea said the acquisition would be made through both preferential issue of shares and purchase of shares from the firm's owners at Rs140 a share.
Tata Tea will acquire a 10.74 per cent of the existing equity base from the promoters and also subscribe to a preferential offer of 15 per cent, making for nearly 26 per cent stake of the expanded capital.
The open offer, which was required under SEBI acquisition rules, was also at Rs140 a share.
The deal, which would be financed through borrowings, will add to earnings in 3-4 years time, chief financial officer L. Krishna Kumar said.
The deal comes a week after Tata Tea said it would receive about $1.2 billion for selling its 30 per cent stake in US vitamin water maker Glaceau to Coca-Cola Co.
Tata Tea's managing director Percy Siganporia said the company had no plans to delist Mount Everest.
The deal was announced after market hours. The offer price represents a 6.5 per cent premium to Mount Everest's closing share price of Rs131.50, and a 15.1 per cent premium to its May30 close.
Tata Tea has taken steps to establish management control of Mount Everest, he said. A task force has been created to develop a global business in the bottled water market. This will be headed by the former CEO of Heinz India, Pradeep Poddar.
The company plans to establish Himalayan as the leader in the natural mineral water category. It would also build additional brands in the enhanced water space, said Siganporia.
Tata Tea had commissioned a water specialist firm - Hidell-Eyster International of the US - to carry out an extensive technical due-diligence of the `Himalayan' source at Himachal Pradesh, said a company statement.
"This would be one of the largest, purest and perennial sources of natural mineral water in the world," the statement claimed.
The current capacity of Himalayan is 2,50,000 litres per day.
Natural mineral water is distinct from bottled water and sells at a premium to the latter. Mount Everest has a 75 per cent share of this market in India. The natural mineral water segment itself has a 9 per cent share of the processed water market in India, currently worth about Rs1,100 crore.
While the Indian market for miner water is growing at a rapid pace, Himalayan already has a small presence in Europe and in the East Coast of the US. Tata Tea would cash in on the worldwide distribution network of Tetley, said Siganporia.