M&A Critique
Tata-Consumer-Products-Merger-Demerger-Coffee

TATA CONSUMER PRODUCTS: FOCUSED AND EFFICIENT RESTRUCTURING

In a move towards becoming a leading Fast-Moving Consumer Goods Company (FMCG), the Board of Directors of Tata Consumer Products Limited & its subsidiary companies approved the Composite Scheme of Arrangement (“Scheme”) amongst Tata Consumer Products Limited, Tata Coffee Limited and TCPL Beverages & Foods Limited.

Tata Consumer Products Limited (“TCPL” or “Transferee Company”) along with its subsidiaries, associates, joint ventures, is engaged in the business of production, trading, and distribution of consumer products mainly tea, coffee, water, other beverages, salt, pulses, spices, snacks etc. TCPL’s operations are spread across regions like India, Europe, USA, Canada, Australia. The equity shares of TCPL are listed on nationwide bourses. The registered office of the company is in the state of West Bengal.

Tata Coffee Limited (“TCL” or “Demerged Company” or “Transferor Company”) along with its subsidiaries, joint ventures and associates is engaged in the plantation business of cultivation, curing and processing of coffee, tea, pepper, and allied plantation products and in manufacture and sale of instant and soluble coffee powders. TCL is among the world’s largest integrated coffee cultivation and processing companies, the second largest exporter of instant coffee, TCL is a subsidiary of TCPL (holding 57.48% stake) and its equity shares are listed on nationwide bourses. The registered office of the company is in the state of Karnataka.

TCPL Beverages & Foods Limited (“TBFL or Resulting Company) is a wholly-owned subsidiary of TCPL and has been recently incorporated to facilitate the proposed transaction. The registered office of the company is in the state of Karnataka.

The Transaction

In line with its strategic priority of unlocking synergies and bringing efficiencies, Tata Consumer Products Limited announced a reorganization plan for its domestic & international business. This plan includes the demerger of the Plantation Business of Tata Coffee Limited into TCPL Beverages & Foods Limited and the merger of the remaining TCL, consisting of its extraction and branded coffee business with Tata Consumer Products Limited.

As a first step of the reorganization plan, the demerger of the Plantation Business of TCL into TBFL and as a second step, followed immediately by the amalgamation of the remaining TCL into TCPL.

The “Plantation Business” of TCL has been identified as the business of TCL relating to the cultivation, curing, processing, manufacture and sale of tea, coffee, pepper, and other plantation crops including other plantation allied business and the roast and ground coffee facility in Kushalnagar works.

Tata-Consumer-Products-Merger-Demerger-Coffee-1

The Appointed Date for the transaction is Effective Date or such other date as may be mutually agreed by the Companies. The “Effective Date” means the date which will be the first day of the month following the month in which the Companies mutually acknowledge in writing that the last of the conditions and matters referred to in Clause 29.1 of the Scheme have occurred or have been fulfilled, obtained, or waived, as applicable, in accordance with this Scheme. It is further clarified in the scheme that demerger will take the effect and subsequently the merger shall be made effective but the issuance of consideration pursuant to the demerger & merger shall be undertaken simultaneously. Thus, the scheme provides for single “Record Date” for demerger & amalgamation. This is because in both cases shares are issued by TCPL.

Swap Ratio

Despite demerged undertaking will be transferred to the wholly-owned subsidiary of TCPL, the consideration for both demerger & amalgamation will be discharged by the TCPL only.

On effectiveness of the Scheme, the shareholders of TCL (other than TCPL) as on the record date will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL, through the issuance of:

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Aniruddha Jain