Unlocking synergies: Tata Consumer Products to merge Tata Coffee with itself

To emerge as a formidable FMCG player and bring about synergy of operations and benefit of scale as well as unified legal and regulatory compliances, Tata Consumer Products (TCPL) on Tuesday announced the merger of all businesses of Tata Coffee (TCL) with itself.

In a regulatory filing, the company said that while the plantation business of TCL will be demerged into TCPL’s wholly-owned arm TCPL Beverages & Foods (TBFL), the remaining business of TCL, consisting of its extraction and branded coffee business, will be merged with TCPL.

The demerger would happen as the first step and the merger as the immediate second step, with both being proposed through a composite scheme of arrangement, the filing said.

Under the scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL.

This will be carried out through the issuance of 1 equity share of TCPL for every 22 equity shares of TCL in consideration for the demerger.

For the merger, 14 equity shares of TCPL will be issued for every 55 equity shares of TCL, it added.

“This will enable the consolidation and 100% ownership of the branded, extractions and plantations business of TCL into TCPL and its wholly-owned subsidiary,” it said.

The boards of directors of TCPL and TCL, at their respective meetings held on Tuesday, approved the combination of the plantation business of TCL with TBFL, the statement said.

TCPL further said that it proposes to purchase a minority interest in its UK subsidiary – Tata Consumer Products UK – by way of a share-swap deal, through a preferential issue of its equity shares.

“The transactions will result in TCPL having 100% ownership of the business of TCL and of TCP UK, which will be an enabler for efficient reorganisation initiatives of its international business,” the statement said.

As on December 2021, TCPL holds a 57.48% stake in TCL.

Commenting on the development, TCPL MD & CEO Sunil D’Souza said, “The restructuring initiative is in line with Tata Consumer Products’ strategic priorities – to unlock synergies and create a future-ready organisation”. He further said, “This exercise will enable us to better leverage our supply chain, create customer-focused business verticals, and accelerate decision making and execution”.

This will be a stepping-stone for further simplification initiatives with a view to achieving recurring operational, administrative and financial synergies, he said adding, “We are confident that this will create significant value for all our stakeholders.”

Tata Coffee MD & CEO Chacko Thomas said, “This reorganisation exercise will enable Tata Coffee to better leverage the strong coffee expertise we have and allow us to integrate more closely with TCPL’s branded coffee business, to propel it further.” He added, “Combining our extractions business with TCPL’s tea extractions business will help us to strengthen our product offerings and unlock market potential by widening the portfolio and geographic reach.”

TCPL has a reach of over 200 million households and has an annual turnover of `11,600 crore with operations in India and international markets.