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    Acquisition of Tetley by Tata

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    ANUSHRI MAYEKAR
    Tata Tea acquired Tetley, a larger British tea company, for £271 million in 1999. This allowed Tata Tea to expand its global reach and learn from Tetley's distribution systems. The acquisition was funded through a combination of equity from Tata Tea and debt financing. Both companies pursued the merger to increase their market shares and profitability. As a result of the acquisition, Tata Tea's market share steadily increased over subsequent years, with the merger having a neutral to positive impact.

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    Acquisition of Tetley by Tata

    Uploaded by

    ANUSHRI MAYEKAR
    93 views3 pages
    Tata Tea acquired Tetley, a larger British tea company, for £271 million in 1999. This allowed Tata Tea to expand its global reach and learn from Tetley's distribution systems. The acquisition was funded through a combination of equity from Tata Tea and debt financing. Both companies pursued the merger to increase their market shares and profitability. As a result of the acquisition, Tata Tea's market share steadily increased over subsequent years, with the merger having a neutral to positive impact.

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    Tata Tea acquired Tetley, a larger British tea company, for £271 million in 1999. This allowed Tata Tea to expand its global reach and learn from Tetley's distribution systems. The acquisition was funded through a combination of equity from Tata Tea and debt financing. Both companies pursued the merger to increase their market shares and profitability. As a result of the acquisition, Tata Tea's market share steadily increased over subsequent years, with the merger having a neutral to positive impact.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    93 views3 pages

    Acquisition of Tetley by Tata

    Uploaded by

    ANUSHRI MAYEKAR
    Tata Tea acquired Tetley, a larger British tea company, for £271 million in 1999. This allowed Tata Tea to expand its global reach and learn from Tetley's distribution systems. The acquisition was funded through a combination of equity from Tata Tea and debt financing. Both companies pursued the merger to increase their market shares and profitability. As a result of the acquisition, Tata Tea's market share steadily increased over subsequent years, with the merger having a neutral to positive impact.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Acquisition of Tetley by Tata

    Submitted by: Anushri Mayekar – B023


    Acquisition of Tetley by Tata

    Merger:
    The deal was a rare example of an Indian company taking over a larger British group.

    The merger was undertaken on two counts

    For one, Tata Tea had their global ambitions well in place, as they wanted to take Tata Tea to the global
    markets. The second reason, from Tata’s side was the fact that they wanted to understand the global
    distribution system.

    The Merger was being seen as something beneficial for both the parties given the synergies that were
    expected.

    Process:
     Tetley was acquired for £271m (equity: £70m, debt: £201m) by a special purpose vehicle, Tata
    Tea GB. The purchase of Tetley was funded by a combination of equity, subscribed by Tata tea,
    junior loan stock subscribed by institutional investors (including the vendor institutions
    Mezzanine Finance, arranged by Intermediate Capital Group Plc.) and senior debt facilities
    arranged and underwritten by Rabobank International.
     TATA Tea (Great Britain), the special purpose vehicle was created for the Tetley acquisition, will
    be merged into Tata Tea as soon as it has repaid its debt obligations. The acquisition was
    financed with $70 million in equity, of which $60 million was brought in by Tata Tea and $10
    million by Tata Tea, USA -- a 100 per cent subsidiary of Tata Tea.
     Takeover deal comprises of – 271mn pounds as Takeover cost – 9mn pounds as legal & banking
    charges – 25mn pounds as WC & additional funding. The SPV leveraged the 70 mn pounds
    equity 3.36 times to raise a debt of 235 mn pounds
     The entire debt amount of 235mn pounds comprises of four Tranches bearing interest @ 11%,
    divided into four tranches – A, B, C and D. Amount raised via tranches A and B were used for
    funding the acquisition whereas C and D tranches were used capital expenditure & WC
    requirements. The tenure varied from 7 years to 9.5 years, with a coupon rate of around 11%
    which was 424 basis points above LIBOR.

    Key takeaways:
    First of all, Tata Tea Ltd. had a major merger deal of Tetley in the year 1999-2000. Also at the same time,
    Tata Tea’s competitors Hindustan Lever Ltd. were also involved in a series of M&A activities.

    Secondly, both the companies engaged in Merger activities because they wanted to increase their
    market shares and increase profitability. When Tata Tea acquired Tetley, it was concerned with
    strengthening its position and to diversify geographically through a dynamic merger activity.

    Thirdly, that the consequences of the merger activity. Tata Tea Ltd. steadily increased its market share
    and had significant variations in the market share over the last few years. The overall effect of the
    merger on market share ranged from neutral to positive.
    References:
    1. https://www.indiatoday.in/magazine/cover-story/story/20091228-2000-tata-tea-tetley-merger-
    the-cup-that-cheered-741660-2009-12-25
    2. https://www.ukessays.com/essays/marketing/tata-merger-with-tetley-group-marketing-
    essay.php
    3. https://viden.io/knowledge/1964/attachments/6924?name=15092981604782.pdf
    4. https://qz.com/india/1474335/tea-gardens-to-tetley-a-brief-history-of-indias-tata-tea/
    5. https://www.thehindubusinessline.com/2000/02/29/stories/14291873.htm

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