FOCUS-Talk brews of Indian bid for Britain's Tetley -TATA to buy Tetley?
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By Rosemary Arackaparambil
BOMBAY, May 26 (Reuters) - Talk that India's Tata group plans to acquire British tea firm Tetley comes as no surprise to analysts who say the firm is a natural contender in any bidding contest.
An Indian daily, the Financial Express, reported on Wednesday that the Tata group was planning to pick up a majority stake in the UK-based blending and packaging firm as part of a strategy to bolster its agro-business.
A group spokesman declined comment, but analysts said Tata has sniffed around Tetley before.
Group company Tata Tea is the world's largest intergrated tea company. It grows, packages and distributes tea.
Privately owned tea bag maker Tetley is the second largest teamaker in the world.
''It is not surprising if they plan to do this, they have always been eyeing Tetley,'' said an analyst with a foreign broking house who asked not to be named.
''The venture capitalists were not tea industry guys, so a sell out was always on the cards,'' said K.Ramachandran, analyst with Birla Marlin Securities.
The Tetley group is controlled by Schroder Ventures, which is part of investment bank Schroders (quote from Yahoo! UK & Ireland: SDR.L) and PPM Ventures, the venture capital arm of financial services group Prudential (quote from Yahoo! UK & Ireland: PRU.L).
''Last time round also the Tatas had come very close to acquiring the company, so it is not surprising if they should try again,'' said Ramachandran.
The Financial Express said the acquisition, which could be the group's first major buy outside India, would cost eight to nine billion rupees ($187-$210 million).
Analysts were not willing to comment on the cost of any acquisition.
Tata Tea has a joint venture in place with the Tetley group to manufacture tea bags and packet teas for both the domestic and export markets.
London's Financial Times reported on April 10 that Tetley had received two takeover approaches. It said one was from the U.S. consumer goods group Sara Lee (NYSE:SLE - news), but did not identify the other.
''If this acquisition happens, Tata Tea can get re-rated,'' said the analyst at the foreign brokerage. ''It means access to the U.S market and Tetley is one of the largest selling brands in the U.S. and UK,'' he said.
''At the end of the day it is the brand that sells.''
Ramachandran said the acquisition would make Tata Tea a global player.
About five percent of Tata Tea's turnover comes from exports. If Tetley was acquired, export turnover would get a boost, analysts said.
Tetley, which withdrew from a planned flotation last year, made 41.1 million pounds ($66 million) profit on turnover of 336 million pounds in 1998, the Financial Times said.
($1 equals 42.8 Indian rupees)
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