Mumbai-based fast moving consumer goods (FMCG) company Tata Consumer Products (TCPL) on Tuesday announced a reorganisation of its businesses with an aim to bring its overseas operations under the fold of the flagship company.
The plan includes demerger of plantation business of Tata Coffee Limited (TCL) into TCPL Beverages & Foods Limited (TBFL), a wholly-owned subsidiary of TCPL. Additionally, the merger of the remaining business of TCL, consisting of its extraction and branded coffee business with TCPL. While the demerger is to take place first, as the first step, the merger of remaining business of TCL has been planned as an immediate second step. Both the moves have been proposed through a composite scheme of arrangement.
Apart from these, TCPL has proposed to purchase the minority interest in its UK subsidiary - Tata Consumer Products UK Limited (TCP UK) - by way of a share swap, through a preferential issue of its equity shares.
“These actions further TCPL’s objective of creating a future-ready organisation and will act as a stepping stone for further simplification. These will also result in operational efficiencies, faster decision making and execution, creation of focused business verticals and unlocking of potential synergies. The consolidated actions outlined here are expected to generate material revenue, cost and other synergies over medium to long term, following the completion of the proposed transactions and future simplification initiatives, which will be undertaken following the receipt of requisite approvals and processes”, the company management said in a statement.
The shareholders of TCL (other than TCPL) will receive an aggregate of three equity shares of TCPL for every 10 equity shares held by them in TCL. To make this work, the company management plans to issue 1 equity share of TCPL for every 22 equity shares of TCL, in consideration for the demerger (as per the approved share entitlement ratio). Also, 14 equity shares of TCPL for every 55 equity shares of TCL, in consideration for the merger.
“Through this transaction, TCL shareholders will get access to multiple growth engines and participation in a larger and fast growing FMCG business. TCPL shareholders are expected to benefit from better synergies and business efficiencies going forward”, it said.
Further, the TCPL board today also approved purchase of 10.15 per cent minority interest in its UK subsidiary - TCP UK - from Tata Enterprise (Overseas) AG, Switzerland (TEO). Going forward, TCPL will issue 74,59,935 equity shares - equivalent to 0.80 per cent stake to TEO, by way of preferential issue.
“The restructuring initiative is in line with Tata Consumer Products’ strategic priorities - to unlock synergies and create a future ready organisation. This exercise will enable us to better leverage our supply chain, create customer focused business verticals, and accelerate decision making & execution. This will be a stepping-stone for further simplification initiatives with a view to achieving recurring operational, administrative and financial synergies”, said Sunil D’Souza, MD & CEO at TCPL.
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