McLeod Russel buys Ugandan tea producer for $25 million

Tea producer McLeod Russel India Ltd has signed a deal to buy out Uganda's Rwenzori Tea Investments for $25 million (Rs117.55 crore) as part of its strategy to expand tea production through overseas acquisitions.

The acquisition has been made through McLeod's UK subsidiary Borelli Tea Holdings, which on Wednesday inked a share-purchase agreement with the UK-based James Finlay and James Finlay International Holdings for acquisition of 100 per cent of the share capital of Rwenzori.

Aditya Khaitan, managing director of the country's largest tea-producing company, said in Kolkata that under the deal, Borelli would be required to pay further $5 million recorded as debt in the Ugandan company's accounts.

Out of the $25 million, $15 million would be paid by McLeod as capital infusion into Borelli, which in turn would raise debt of $10 million. ''The transaction in regard to the share purchase agreement is scheduled to be over on 5 January 2010,'' Khaitan said.

With this acquisition, McLeod's total production will rise to 96 million kg, up from 81 million kg. Exports too would rise to 49 million kg from 34 million kg. ''In the next five years, we'll try to raise the production of the Ugandan properties from 15 to 20 million kg annually,'' Khaitan said.

Rwenzori has six gardens and five factories spread over 3,300 hectares. In 2008, it posted a net profit of $5 million on a turnover of $24 million. These figures are likely to rise to $7 million and $30 million in 2009.