Tata Coffee, Tata Consumer shares rally on merger announcement

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Shares of Tata Coffee Ltd rallied up to 12% whereas that of Tata Consumer Products surged about 5% on the BSE in Wednesday’s trading session after parent Tata Consumer Products Ltd revealed that it would streamline its coffee business by merging the company with itself.

Tata Consumer Products Ltd (TCPL) on Tuesday announced the merger of all businesses of Tata Coffee Ltd with itself as part of a reorganisation plan in line with its strategic priority of unlocking synergies and efficiencies.

While the plantation business of Tata Coffee Ltd (TCL) will be demerged into TCPL’s wholly-owned arm TCPL Beverages & Foods Ltd (TBFL), the remaining business of TCL, consisting of its extraction and branded coffee business, will be merged with TCPL, the company said in a statement.

Tata Consumer said the plantation business of Tata Coffee would be demerged into Tata Consumer Products’ beverages and foods unit, which is known for brands like “Tata Tea” and “Tetley”.The remaining business of Tata Coffee, which houses extraction and coffee brands, would combine with Tata Consumer.

Under the scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL. This will be carried out through the issuance of 1 equity share of TCPL for every 22 equity shares of TCL in consideration for the demerger. For the merger, 14 equity shares of TCPL will be issued for every 55 equity shares of TCL, the company added.

Global brokerage Nomura believes that the merger would add to Tata Consumer’s earnings by 3%-4%, while also improving the company’s supply chain.

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