India’s biggest conglomerate, Tata Sons Ltd., has approved the corporate restructuring by transferring all branded food products from Tata chemicals Ltd. to Tata Global Beverages Ltd.
Three words that portray the strategy that Tata Sons chairman N Chandrasekaran opted for the restructuring – simplification, synergy, and scale.
Tata sons chairman N Chandrasekaran initiated this strategy to curtail outlay between the subsidiary companies. Moreover the strategy was initiated to boost operational efficiency and consolidate companies sharing similar synergies within Tata Sons Ltd. Further the impending restructuring will lead to the enhancement of Tata Global beverage Ltd.
SYNERGIES OF THE DEAL:
Tata global beverage will purchase all food products and transfer its shares in return to Tata Chemicals Ltd. Furthermore, Tata Global Beverages will be renamed to “Tata consumer product Ltd.”
Following the Scheme, each shareholder of Tata Chemicals Ltd. will be entitled to 1.14 new equity shares of Tata global beverage Ltd. (TGBL) for every 1 equity share held in Tata chemical Ltd. (TCL) i.e. a shareholder possessing 100 equity shares in TCL will receive 114 equity shares in TGBL.
Furthermore, this merger shall provide compelling benefits to shareholders by unraveling the value of their consumer product business. There will be an enhancement of operational growth in TCL in its specialty chemicals business in the field of agricultural-science, material science and power storage science.
To enhance synergies Tata sons had previously consolidated operations of aerospace and defense companies. TCL includes consumer products, such as salt, pulses, spices, chemicals, and Tata swach.
The entire portfolio of Tata chemicals, consisting of branded salt, pulses, spices, chemicals, and Tata swach, will be transferred to Tata consumer product Ltd (earlier known as TGBL)
TGBL forecasts that consumer products vertical will advance the exposure to high operational and organizational growth in product categories. In addition it will further provide a strong platform to seize new opportunities. The deal is consistent with its strategy to become a broader Fast-moving consumer goods (FMCG) player.
Moreover the transaction shall create a concrete consumer products company with a combined turnover of Rs 9,099 crore and EBITDA of Rs 1,154 crore for FY19.
The merger deal is imposed on the company to complete the necessary statutory and regulatory sanctions including approvals of the stock exchanges. Further, It will be from respective benches of National Company Law Appellate Tribunal (NCLAT), lenders/creditors of each of the companies, and SEBI and the respective shareholders. The deal is anticipated to be completed by Q4FY20 / Q1FY21.
In addition, the restructuring was approved by the board members of TGBL and TCL at a meeting held on May 15, 2019
- The merger will initiate a consumer product company with a turnover of Rs.9, 099 Cr. as of FY19.
- The deal will create a consumer product company with EBITDA of Rs.1,154 Cr. as of FY19.
- The EBIT margins of TGBL stood at 8.4%, while EBIT margins of TCL stood at 17%.
- The shareholdings of the demerged company shall not undergo any changes.
- The Current Paid-up issued share capital of the resulting company (i.e. Tata consumer product Ltd.) is Rs.63.1Cr.
- Promoter shareholding in acquiring a company to be 34.45%.
- Post issue of shares by Tata Consumer Products & promoter stake to be 33.18%
(Rs. in crores)
|SR. NO.||PARTICULARS||TATA GLOBAL BEVERAGE LTD.||TATA CHEMICALS LTD.|
As on 15th May 2019, the share price of TGBL ended at Rs 198.50, down Rs 1.85, or 0.93 % on the BSE. The share price of TCL stood at Rs 557.00, down Rs 16.80, or 2.93 % on the BSE.
TGBL has been endeavoring towards reorganization the structure and shifting more activities in India in terms of back office and technology related work.
Moreover, the merger between consumer product businesses of TGBL and TCL is predicated to free the company’s business managers to focus on core activities. To sum up the deal will bring in agility and spur quick decision-making, as Tata sons Ltd seeks to become one of the largest FMCG companies in India with a possible merger with group firm TCL.