Tata Tea, along with the London-based European Bank for Reconstruction and Development, has bought a 51% stake in Grand, the second-largest tea and coffee brand in Russia.
Tata Tea, along with the London-based European Bank for Reconstruction and Development, has bought a 51% stake in Grand, the second-largest tea and coffee brand in Russia, for an undisclosed amount.
Tata Tea will hold 33.2%, while EBRD will hold 17.8% after the acquisition. The holding of Alexander E Borisov, the original promoter of the unlisted company, with whom Tata Coffee has ongoing business relations, will shrink to 49%.
The deal which, subject to the fulfilment of various conditions, will see the beverage group of companies enter Russia, a market where coffee is becoming increasingly popular and tea is a national beverage. The acquisition is expected to be completed during the first half of 2009.
Richard Wallis, an EBRD spokesperson, said the bank is a “medium term” investor in the company and dispelled the notion that it was a distress sale.
“EBRD is not in the business of distress sales. Negotiations with Tata Tea have been going on for some time,” he said. “We do not intend to remain invested in the company for ever,” he added.
Tata Tea said it intends to work with the EBRD to build a “multi-million dollar business over the next 3 years” through a combination of acquisitions and brand introductions.
In separate statements, the EBRD and Tata Tea said that the combined investment will be used to fund the modernisation of Grand’s production facilities.
“Grand is mainly focused on regions outside the big cities and areas like the Urals, Siberia and Southern Russia... [The investment] will open the way for new market opportunities,” EBRD said in a statement.
The bank said, in addition to capital, it expects Tata Tea, the world’s largest tea producer, to bring in much needed expertise into the Russia. “Tata Group has no investments in the beverages sector in Russia so far, but sees strong growth potential on a market where coffee is becoming increasingly popular and tea is a national beverage,” EBRD said.
EBRD has invested more than €5.0 billion in around 330 projects since 1991, giving an average investment size of around €15 million (around Rs 100 crore). Wallis said the Moscow-based Federal Anti-Monopoly Agency is expected to take another two months to reach a conclusion on whether to approve the deal or not.
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