Tatas' shopping spree: 27 in 6 years at Rs 16,000 crore!

The Tatas are out shopping again. Since February 2000, the group has acquired as many as 27 companies, both in India and overseas, at a total cost of over Rs 16,000 crore ($3.5 billion)!

In the group's latest acquisition, Tata Tea on August 23, 2006 bought out a 30 per cent stake in the US-based Energy Brands Inc for $677 million (nearly Rs 3,148 crore), jointly with its promoter Tata Sons. Of the top 10 overseas acquisition deals so far, five have been by Tata group companies.

The New York-based EBI has several best-selling brands in the United States: Glaceau Smart Water, Glaceau Fruit Water & Go-Go Action Drinks. Energy Brands is Glaceau's parent company. Glacéau was founded in 1996 by J Darius Bikoff, who is also the CEO of the company, and has seen compounded annual growth of 200 per cent since its inception, with over five million bottles being sold every day.

The table below shows the acquisitions made by the Tata Group over the last six years, and the text that follows gives a brief story of the various acquisitions made by the Tatas, India's most respected business house.

(Source: Tata Group)

Tetley acquisition

Tata's foray on the global map can be traced back to February 2000, when Tata Tea acquired the Tetley Group, UK for a sum of 271 million pounds, the first major cross-border acquisition by an Indian group. After this acquisition, Tata Tea along with its subsidiary companies, has a significant presence in over 35 countries worldwide, making it one of the first truly Indian multinational corporation.

It was the perfect blend. Tata Tea was a leader in India in the packaged tea segment with a presence in developing countries through exports. Tetley was the second largest tea brand in the world, with a presence in developed geographies. The integrated vista offered access to new markets and products to both, not to mention the synergy in tea buying and blending operations. 

CMC acquisition

As part of the Indian government's general policy of gradually reducing its holdings in public sector enterprises, the government sold its 51% controlling stake in CMC Ltd. to Tata Sons at Rs 152 crore in November 2001. Soon after acquiring the shares, Tata Sons made an open offer to the public for acquiring additional 16.69% equity stake (25.27 lakh shares) in CMC at a price of Rs 281.26 per share, under the mandatory provision of the deal.

Post-acquisition, Tata Sons held 51 per cent share in CMC, while the Government of India held 32.31 per cent and the public held another 16.69 per cent.

However, in Mar 2004, Tata Sons transferred its entire shareholding in CMC Ltd. to its wholly owned subsidiary, Tata Consultancy Services Limited (TCS), in an off-market transaction. CMC is now a subsidiary of TCS Ltd.

VSNL acquisition

After CMC, the Tatas once again emerged successful by acquiring its 25% stake in Videsh Sanchar Nigam (VSNL) for a consideration of Rs 1,439 crore or Rs  202 per share, thereby helping the Tatas to be established in the telecom sector as an integrated player.

Hughes acquisition

Tata Teleservices Ltd (TTSL) acquired 50.83% controlling stake in Hughes Telecom (India) Limited (HTIL). As consideration for the acquisition of 71.43 crore equity shares of HTIL, TTSL issued 71.43 crore redeemable non-cumulative convertible preference shares (RPS) of TTSL in favour of the HTIL sponsors.

Regent acquisition

The Taj group of hotels, along with ICICI Trustee Services (I-Ventures) acquired the 500-room Regent Hotel at Bandra in Mumbai from the Lokhandwala group for a consideration of Rs 415 crore or Rs 80 lakh per room. Taj has acquired a stake of 19.9% for Rs 24 crore and I-Ventures holds an equity of 80.1%, for Rs 95 crore. The remaining amount consists of debt liabilities assumed by the new promoters.

The new hotel is called Taj Lands End, with the original promoters, the Lokhandwala group, having completely exited the company over a period of time.

AFS acquisition

Tata Consultancy Services (TCS) acquired the residual 75.1% in Airline Financial Support Services India Pvt. Ltd. (AFS), a business process outsourcing outfit, in May 2003, thereby making the latter a 100% subsidiary of TCS. AFS caters to the requirements of the airline and hospitality industry. Thus the acquisition of AFS has geared TCS to take advantage of its global presence by marketing services to international airlines and hospitality industry.

Gemplex acquisition

In July 2003, Videsh Sanchar Nigam (VSNL) acquired the assets and network of Gemplex Internet, an IP-VPN (international Internet protocol virtual private network) provider for US, Europe and the Far-East, for an undisclosed sum.

The acquisition enhanced VSNL's existing network capabilities and provides a ready VPN platform in the high traffic regions in these countries.

Daewoo acquisition

In yet another significant step towards becoming a global player, Tata Motors completed the acquisition of Daewoo Commercial Vehicle Company Limited (DWCV), Korea in Mar 2004, thereby making the latter a fully owned subsidiary of Tata Motors. Tata Motors' $102 million (KRW 120 billion) acquisition, the largest Indian acquisition in Korea, facilitates the company's planned foray into Southeast Asian markets like South Korea, Thailand, Malaysia and China.

Dishnet acquisition

With a view to strengthen and consolidate its presence in the Internet space, Videsh Sanchar Nigam Ltd, took over the narrowband and broadband businesses of Dishnet's ISP division for a consideration of Rs  270 crore. The transaction includes the acquisition of all internet assets, employees and customers of Dishnet's ISP division.

The acquisition of Dishnet gave VSNL access to a sizable number of customers in both dial-up and broadband services and presence across 38 cities and 200 towns. It also gave VSNL access to the vast base of over 600 owned and franchised cybercafés of Dishnet. The company sells its internet solutions under the brand name 'Tata Indicom' 

ASDC acquisition

In Mar 2004, Tata Consultancy Services (TCS) acquired the remaining 51% stake in Aviation Software Development Consultancy India Ltd (ASDC), a company focused on providing consultancy and solutions to the aviation industry, from Singapore Airlines through a cash deal of Rs  140.25 million paid by Tata Sons.

Prior to the acquisition, TCS held 49% stake through Tata Sons and Tata Industries in the company. ASDC is TCS's second significant acquisition following the acquisition of Airline Financial Services in mid 2003. 

Phoenix acquisition

Tata Consultancy Services (TCS) acquired Phoenix Global Solutions (India) Private Ltd, from Phoenix Companies Inc. for an undisclosed amount in May 2004. This acquisition was in line with its focus to consolidate the strengths developed by TCS over a period of time in the financial segments. This acquisition gave TCS an impetus to attract new customers and at the same time, help grow their existing customers.

NatSteel acquisition

Tata Steel's recent acquisition of Singapore's NatSteel in August 2004, marks yet another global foray for the Tatas. The company has acquired the steel business of the Singapore based company in an all cash deal of approximately Rs  1,313 crore (S$ 486.4 million).

The acquisition includes a 26% stake owned by NatSteel in Southern Steel Berhad, the 1.3 million tonne steel maker in Malaysia. Thus as per the terms of the agreement, NatSteel's business provides Tata Steel access to 6 key Asian steel markets namely Singapore, China, Thailand, Malaysia, Vietnam, Philippines and Australia. NatSteel is to spin off its entire steel business into a wholly owned subsidiary, NatSteel Asia Pte Ltd (NatSteel Asia). Subsequently Tata Steel would acquire the company.

Tyco acquisition

In November 2004, Videsh Sanchar Nigam Limited (VSNL), announced that the company has agreed to acquire Tyco Global Network, one of the world's most advanced and extensive submarine cable systems for $130 million.

The acquisition, which remains subject to government approval in the United States, India and other countries, would give VSNL control over a network that spans 60,000 kilometers (37,208 miles) and three continents.

The agreement will enable VSNL to provide the enterprise and carrier clients worldwide with customized and robust connectivity solutions under one trusted global brand.

Tata Motors-Hispano Carrocera deal

In February 2005, Tata Motors, acquired 21% stake in Hispano Carrocera S.A (HC), a well known Spanish bus manufacturing Company, with an option to acquire 100% holding. Tata Motors will have the license for technology and brand rights from HC. The total deal consisting of Equity, Debt & Technology Licensing will add up to Euro 12 million (about Rs 70 crore).

HC which currently enjoys a market share of 25% in the bus market in Spain, sells its buses in Europe and several other countries outside Europe. It has its own in house product development facility for buses and coaches.

The strategic alliance with Hispano Carrocera will give Tata Motors access to its design and technological capabilities to fully tap the growing potential of this segment in India and other export markets, besides providing them with a foothold in developed European markets.

Tata Chemicals buys into Moroccan company

In Mar 2005 Tata Chemicals approved the entry of the company, as an equal partner in Indo Maroc Phosphore S.A. (IMACID), Morocco, which is engaged in the manufacture of phosphoric acid, by acquisition of shares from the two existing joint venture (JV) partners, for a total consideration of Rs 166 crore (US$ 38 million).

Tata Chemicals' entry into IMACID with one-third shareholding assures the company supply of phosphoric acid, builds a bond with a company that is a leading player in phosphatic fertilisers and places a footprint in new geographies outside India.

Teleglobe acquisition

In July 2005, Videsh Sanchar Nigam Limited (VSNL) announced that the company has agreed to acquire Teleglobe International Holdings Ltd., a leading provider of wholesale voice, data, IP and mobile signaling services.

The acquisition would be carried out through the amalgamation of Teleglobe with a VSNL subsidiary in Bermuda and would be valued at $239 million, comprising assumption of debt and payment of $ 4.50 per share to Teleglobe shareholders.

The acquisition, which remains subject to Teleglobe shareholder approval and government consents in various countries, would give VSNL access to an extensive global network that reaches more than 240 countries and territories with advanced voice, data and signaling capabilities and ownership interests or capacity in more than 80 subsea and terrestrial cables.

VSNL would also access more than 200 direct and bilateral agreements with leading voice carriers, many of which are the incumbent carriers within their countries or large international wireless service providers. Headquartered in Hamilton, Bermuda with a large operating center in Montreal, Canada, Teleglobe also has more than 1,400 wholesale customers and carries over 13 billion minutes of voice traffic globally

Taco acquires Wundsch Weidinger

In August 2005, Tata AutoComp Systems Limited (TACO) acquired the business and assets of a German Automotive Components supplier, Wündsch Weidinger. The company that had filed for insolvency in Mar 2005 produces functional plastic parts and systems for the automotive industry. 

TACO has acquired the business and assets of the Company, as well as its 270 employees, through its 100% subsidiary set up in Germany for this purpose. 

This acquisition provides TACO access to the European market for the Interiors business of TACO. Weidinger's facility is located at Coburg, in the state of Bavaria, Germany. The Company offers development, tool shop, precision injection moulding, surface enrichment and assembly operations. Customers include major OEMs including Audi, Bentley, BMW, Daimler Chrysler, Volkswagen and Volvo.

Tata Technologies acquisition

In October 2005, Tata Technologies Limited (TTL), through its subsidiary, Tata Technologies Inc., USA (TTUS), announced that it had received unconditional acceptance of approximately 92.5% of the equity shares of INCAT International Plc, a UK-based company listed on the Alternative Investment Market (AIM) of the London Stock Exchange, for which it had made a cash offer. The value of the total offer is £ 53.40 million (approximately Rs 411 crore), for 100% of INCAT's equity shares. The offer will remain open for acceptance until further notice.

TTUS had made a cash offer at 220 pence per share (Rs 169.40 per share). The offer price had represented a 4% premium on INCAT's closing price of 211.5 pence per share, as on August 17, 2005, when TTUS made an open offer to acquire INCAT International.

Both Tata Technologies and INCAT provide engineering and design services and PLM (product lifecycle management) products and services, primarily to manufacturers and their suppliers in the international automotive, aerospace and engineering markets.

The offshore capabilities of Tata Technologies in the field of engineering automation services combined with the high-end onshore strengths of INCAT are expected to offer a strong and seamless onshore/offshore delivery capability to the international customers in the automotive, aerospace and engineering industries.

Tata Tea - Good Earth acquisition

In October 2005, Tata Tea Ltd, through its US subsidiary Tetley US Holdings Ltd, signed an agreement to acquire FMALI Herb Inc and Good Earth Corporation for an undisclosed amount.

Good Earth Corporation owns the `Good Earth' brand, which is licensed to FMALI Herb Inc. Good Earth is one of the fastest growing speciality tea brands in the US, especially on the west coast. It has a 3.7% share of the US speciality tea market and a turnover in excess of $16 million. This acquisition is an important contribution to the Tata Group's plans for growing the Tata Group's tea business around the world.

TCS - FNS acquisition

In October 2005, Tata Consultancy Services acquired Sydney-based Financial Network Services (FNS), a leading Australian core banking solutions vendor for approximately US$ 26 million.

The acquisition of FNS will further strengthen TCS' portfolio of banking and financial services products by adding a strong, high-performance Core Banking Solution with an established global customer-base. With its rich functionality, proven scalability and robustness, FNS' Core Banking Solution is capable of addressing the needs of top global banks.

TCS - Comicrom acquisition

In November 2005, Tata Consultancy Services bought 100% equity in Comicrom, the market leader in the Banking and Pensions business process outsourcing business in Chile for US $23 million.

The acquisition enhances TCS' strategy of pioneering the next generation of verticalised, platform-led BPO opportunities. Comicrom is the leading player in the Banking BPO sector with a 57% market share of the check processing business in Chile and counts more than 70% of the banks operating in Chile as its customers. The acquisition of Comicrom will also help TCS pursue robust growth in the Latin American region.

Indian Hotels Starwood Hotel purchase

In December 2005, Indian Hotels Company Limited (IHCL), announced the purchase of a 100 room, five-year old hotel, located in close proximity to the central business district of Woolloomooloo Bay, Sydney. The hotel is currently operated by the Starwood Group and is amongst the top five hotels in Sydney. 

The acquisition price is Australian $36 million. The foray into Australia represents yet another step of the Indian hotel major into another part of the world, reflecting the Tata Group's strategic intent of becoming a global force.

Tata Steel -- Millennium Steel acquisition

In December 2005, Tata Steel Limited entered into a Definitive Agreements with Cementhai Holding Company - a 100% subsidiary of the Siam Cement Company, Thailand to acquire its shares and invest additional equity in Millennium Steel Company subject to certain conditions. The size of the total deal is US $ 404 mn.

Under the terms of the agreement, Cementhai Holding Company, the largest shareholder of Millennium Steel with a 40% equity stake (prior to the new shares subscribed to by Tata Steel) have committed to sell their shares into a voluntary tender offer that Tata Steel will make for all of the equity and preference shares of Millennium Steel subject to certain conditions precedent.

The tender offer and the subscription to new shares by Tata Steel will be at Baht 1.15 per share.

The investment is a significant progression in Tata Steel's globalisation initiatives and, together with the earlier acquisition of NatSteel's steel business, will significantly enhance its market position in South East Asia. The acquisition would have a strong fit with Tata Steel's strategic expansion plans and there are likely to be significant synergy benefits in the future as a consequence of the transaction.

Tata Chemicals Brunner Mond acquisition

In December 2005, Tata Chemicals entered into two separate agreements for acquiring a majority stake in a U.K. based Chemical Company, Brunner Mond Group Limited, subject to certain terms and conditions and regulatory approvals. Details of the transaction would be communicated on signing of definitive agreements.  Brunner Mond Manufactures soda ash and sodium bicarbonate, and has manufacturing sites in three countries - U.K., Netherlands, and Kenya.  Tata Chemicals has acquired it for Rs 506 crore.

Tata Tea acquires Jemca

In May 2006, Tata Tea Limited, subsidiary Tata Tea (GB) Ltd., UK signed a definitive agreement to acquire the assets of market leading Tea Company in the Czech Republic JEMČA, from food processing company Alima Značková Potravina. a.s. The acquisition has been funded by The Tetley Group. JEMČA has 26.6%* volume share of the tea market in the Czech Republic and turnover of 300 million Czech Koruna, US$12.5 million.

JEMČA has been in the business of tea since 1974, originally as part of a state owned company and latterly as part of the Alima group of companies. The company sells a wide range of black, green and fruit and herbal teas which it produces at its factory in Jemnice, about 200km South East of Prague. JEMČA will continue to pack teas at its production facility in Jemnice and continue to trade under the JEMČA brand name.

Tata Coffee Eight O Clock Coffee Company acquisition

Tata Coffee Limited, a 51% owned subsidiary of Tata Tea Limited signed a definitive agreement to acquire Eight O' Clock Coffee Company ("EOC"), U.S.A. from Gryphon Investors for a total acquisition price of US$220 million (Rs 1,015 crore). EOC has over 100 years of brand history and retail coffee experience in the U.S.  It is the # 1 player in the branded whole bean market and the category leader in the value gourmet segment in the U.S. retail market.

Within the broad U.S. food category, EOC is the third largest coffee brand by volume behind Folgers and Maxwell House. EOC enjoys significant retail distribution strength with approximately 67% of All Commodity Volume penetration of the U.S retail coffee market. In calendar year 2005, EOC had net sales of US$109 million (Rs 505 crore) and EBITDA of US$27 million (Rs 125 crore).

EOC provides a sizable entry platform and an established brand to Tata Coffee in the US$21 billion (Rs 97,000 crore) US coffee market. The acquisition which will be financed through a combination of equity and non-recourse debt will transform Tata Coffee from a regional coffee player in the Indian market to a significant global player with strong and powerful brands in the global markets including in the US.

This acquisition is in line with Tata Coffee's objective to move up the value chain and become a leading and fully integrated player in the global coffee industry. Following this acquisition, the group will now have significant scale in all important markets in Asia, Europe and North America.