Indian Tea Co. Buys Brit Tea Giant
BOMBAY, India (AP) _ In the largest-ever acquisition by an Indian company, Tata Tea bought British tea giant Tetley Group in a $433.6 million deal, heralded as part of a growing trend among once-insular companies that have emerged from decades of market socialism in India to make bold inroads abroad.
Tata Tea, part of the Tata Group, is the largest integrated tea company in the world, with additional interests in coffee and spices. Its purchase of Tetley, maker of the second-biggest brand of teabags in the world, was announced Sunday. The deal is set to be completed in March.
Company officials and analysts waved aside the historical irony of an Indian company buying a brand of its former colonial master, saying market forces were the driving force.
``That is all buried in the past. This has more to do with India’s economic revival and the strong surge of Indian companies abroad,″ said Romit Chaterji, vice president of corporate affairs at Tata.
Last year, software firm Infosys was the first Indian company to be listed on the Nasdaq, followed by Satyam Infoway. Later, long-term lender ICICI listed on the New York Stock Exchange.
``As the country is opening up, it is significant that Indian companies are going international to acquire companies with reputed brands,″ said Ratan Tata, chairman of the Tata Group. ``We hope many other Indian companies will follow us.″
When markets opened today in India, the price of Tata Tea was $13 a share, up 7.6 percent from Friday’s close of $12.
The 123-year-old Tata Group has interests in consumer durables, hotels, steel, automobiles, chemicals, power generation, software, telecommunication and housing.
Tata Tea has 25 percent of India’s market for packaged tea, second only to industry leader Hindustan Lever Ltd.’s 40 percent share.
Tata officials believe the takeover will give them firm access to markets in North America, Europe and Australia, where the British firm already has market penetration.
``We are naturally thrilled at buying a global brand twice our size. It is a challenge,″ Chaterji said.
The two companies have already worked together through a joint venture, Tata Tetley, which manufactures tea bags in India.
Chaterji said he felt the deal would help shake other Indian companies ``out of a defensive mode.″
The government has often been accused of sheltering Indian companies from foreign competition. Since it began economic reforms aimed at dismantling its socialist-style economy in 1991, the government has eased restrictions on overseas companies wanting to do business in India.
Satish Turlapati, a research analyst at brokerage SSKI, said additional acquisitions were likely in the software sector, where India has excelled thanks to a core of highly educated computer programmers and engineers.
``This happened in an industry where India is strong. It will continue to occur wherever Indians have core competency and where valuations favor Indian companies. It will definitely happen in software,″ he said.
Tata Tea registered a profit of $29 million in 1999 and this year’s estimate is $28 million.