The Hindu Business Line : Tata Tea buys 24% stake in Mount Everest for Rs 110 cr

Water vertical: Mr Percy T. Siganporia (right), Managing Director, Tata Tea, and Mr Ken Pringle, Executive Vice-Chairman & CEO, Tetley Group, at a press conference in Mumbai on Friday. - Shashi Ashiwal

Mumbai June 1 Tata Tea on Friday sealed all speculation on its acquisition of Mount Everest Mineral Water Company, and said it has agreed to buy 24 per cent stake in that company for Rs 110 crore.

It will make an open offer for an additional 20 per cent at Rs 140 per share, for an estimated Rs 100 crore.

Mount Everest makes the Himalayan brand of mineral water.

Tata Tea will acquire a 10.74 per cent of the existing equity base from the promoters and also subscribe to a preferential offer of 15 per cent, making for a 24 per cent stake of the expanded capital.

"We have a tea vertical, a coffee vertical and now, a water vertical," said Mr Percy Siganporia, Managing Director, Tata Tea, at a news conference on Friday.

Tata Tea has taken steps to establish management control of Mount Everest, he said. A task force has been created to develop a global business in the bottled water market. This will be headed by the former CEO of Heinz India, Mr Pradeep Poddar.

The company plans to establish Himalayan as the leader in the natural mineral water category, and will build additional brands in the enhanced water space, said Mr Siganporia.

Due-diligence

Tata Tea had commissioned a water specialist firm — Hidell-Eyster International — of the US to carry out an extensive technical due-diligence of the `Himalayan' source at Himachal Pradesh, said a statement.

A statement from the firm claimed, "This would be one of the largest, purest and perennial sources of natural mineral water in the world". The current capacity of Himalayan is 2,50,000 litres per day.

Natural mineral water is distinct from bottled water and sells at a premium to the latter. Mount Everest has a 75 per cent share of this market in India. The natural mineral water segment itself has a 9 per cent share of the processed water market in India, currently worth about Rs 1,100 crore.

Although it is too premature to talk about exports, especially when the Indian market is itself growing at a rapid pace and is under-addressed, Himalayan already has a minuscule presence in Europe and in the East Coast of the US. In addition, the worldwide distribution network of Tetley will help, should the need arise, said Mr Siganporia.

Funding

Tata Tea, which stands to make a bumper profit of Rs 2,000 crore from its investment in Glaceau, will raise debt of roughly the acquisition amount (Rs 210 crore) to fund the Mount Everest acquisition, said the Chief Financial Officer, Mr L.K. Krishnakumar.

The company's current debt of Rs 500 crore as well as debentures worth Rs 100 crore will most likely get extinguished in four to six months' time, making it a debt-free company, he said.

The acquisition will be EPS accretive in three-four years' time, he said.

The promoters, Mr Vinod Sethi and Mr Salim Govani (through Foresight Holdings Pvt Ltd), will continue to hold a 9 per cent stake in Mount Everest. They will also continue to be on the management, said Mr Siganporia.

Institutions hold a 24 per cent stake in Mount Everest. The remaining stake is held by the public.