McLeod Russel India Ltd, the bulk tea company of the BM Khaitan group, today announced its decision to acquire a majority stake in the Magor-held Williamson Tea Assam, for Rs 168.66 crore (Rs 1.69 billion).
There were also indications that the Magor and Khaitan families, which had officially split four years ago, could once again come together in a business partnership.
When asked whether the Magor family would weigh the possibility of partnering the Khaitan family in Kenya, where it has significant tea operations, Philip Magor, chairman, Williamson Tea Holdings, said, "We will welcome and consider a joint venture option with the Khaitan family for expanding the Kenyan operations."
Speaking from London, Deepak Khaitan, vice-chairman of MRIL, said his group was looking for more buyouts in the domestic and international space.
In the domestic space, MRIL would explore possibilities in good quality Assam gardens while in the international space, it was keen on Kenya, Sri Lanka, Vietnam and Tanzania, he added.
The offer price of the Williamson Tea Assam deal was Rs 140 per share and an additional Rs 30 per share was agreed upon for a non-compete arrangement in the Indian tea industry.
Consequently, MRIL would have to make an open offer to acquire upto 20 per cent of the paid-up equity share capital of Williamson Tea Assam.
The acquisition would be effected through a buyout of 100 per cent share capital of Borelli Tea Holdings Limited, UK, from Williamson Tea Holdings Plc, London, which in turn holds 70 per cent of Williamson Tea Assam.
Khaitan said MRIL would finance the acquisition through external borrowings and internal accruals. ICICI Securities advised MRIL on the transaction.
The company is weighing different options for structuring the deal and preparing a roadmap for the company. When asked whether the group would weigh the option of merging McLeod Russel with Williamson Tea Assam, he said different options were being explored.
With the acquisition, the Khaitans will have 70 per cent in Williamson Tea Assam and will then have to make a 20 per cent open offer. If the company managed to garner 20 per cent, then Khaitans' total holding would be around 90 per cent in the company.
According to Sebi regulations, 90 per cent holding by promoters could lead to delisting of the company.
Khaitan said the open offer price would be either Rs 140, the offer price, or six months average trading price, whichever is higher. The Williamson Tea Assam scrip today touched an intra-day high of Rs 166 on the Bombay Stock Exchange and then finally closed at Rs 153.55.
Williamson Tea Assam has 17 tea gardens in Assam and has an annual production of 20 million kg. With this deal, MRIL with an annual production of 42 million kg of tea, would become the world's largest integrated tea company with an annual production of 62 million kg.
Magor said the Magor family was confident that Williamson Tea Assam would pass into safe hands and it was anticipated that they would continue to be well represented at board levels so that there was a strong measure of continuity for the management and employees of Williamson Tea Assam.
Khaitan said the move made immense business sense as it would not only rationalise costs but would continue to offer customers the best quality of premium tea.
Khaitan and Magor families may operate jointly in Kenya
Khaitans looking for more buyouts in the domestic and international markets
- Acquisition to be funded by external borrowings and internal accruals