Tata Consumer Products Ltd (TCPL) announced on Friday that it has signed definitive agreements to fully acquire Capital Foods, owner of Ching’s Secret and Smith & Jones, and Organic India, the Fabindia-backed organic teas and health products maker. TCPL didn’t say how much the Capital Foods acquisition will cost but people with knowledge of the matter told ET the maker of instant noodles and condiments had been valued at ₹5,100 crore. TCPL said the takeover of Organic India will cost ₹1,900 crore.
TCPL will acquire 75% of Capital Foods upfront and the remaining 25% over the next three years. Invus Group and US private equity group General Atlantic will divest their respective 40% and 35% stakes. Invus is a European family office and investment arm. ET was the first to report both acquisitions in its January 12 edition.
Strengthening pantry platform
“This move is consistent with Tata Consumer’s strategic intent to expand its product portfolio and its target addressable market in fast growing/high margin categories,” TCPL said in a stock exchange filing.
“The development is mildly negative for Nestle India as Nestle was also likely one the bidders for Capital Foods and competition in noodles and cooking aids will increase once TCPL acquires Capital Foods as it can scale it up further,” Nuvama Equities said in a note.
TCPL said Capital Foods has strong umbrella platform brands with a portfolio of unique products for in-home consumption in fast-growing categories such as Ching’s Secret, which leads the market in desi Chinese products across categories like chutneys, blended masalas, sauces and soups. Smith & Jones caters to in-home cooking of Italian and other western cuisines.
The acquisition will enable TCPL to expand its product portfolio and strengthen its pantry platform. There are significant synergy benefits with the existing businesses of TCPL in areas spanning distribution, logistics, exports and overheads.
“We believe this is a good strategic and financial fit,” said Sunil D’Souza, TCPL MD and CEO. “It will open up significant market opportunities in the fast-growing, non-Indian cuisines segment, leveraging the sales and distribution platform that we have built.”
Shantanu Rastogi, managing director and head, India, at General Atlantic, said: “We have had a great partnership with (Capital Foods founder) Ajay Gupta in scaling Ching’s and Smith & Jones. We wish Ajay and Tata Consumer Products the best in the next phase of development of Capital Foods.”
All-cash deal
TCPL will fully acquire Organic India for ₹1,900 crore in an all-cash deal. “The board of directors approved the acquisition of up to 100% of the equity share capital of Organic India Pvt Ltd,” TCPL said in an exchange filing. “This move is consistent with Tata Consumer’s strategic intent to expand its product portfolio and its target addressable market in fast-growing/high-margin categories. This acquisition will create a health and wellness platform.”
The overall size of the categories in which Capital Foods operates is estimated at Rs 21,400 crore.
