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US energy drink to quench Tata thirst

Mumbai, Aug. 23: “We are a beverage company and we are going for a share of the bladder,” R.K. Krishna Kumar, vice-chairman of Tata Tea and director of Tata Sons, told reporters at a late evening conference call after sewing up the group’s biggest cross-border deal through which it picked up a 30 per cent stake in US-based energy drink maker Glacéau.

The latest deal indicates that the Tata group’s thirst to go after overseas buyout hasn’t been slaked by a spate of deals over the past five years.

“Glacéau is part of a very exciting, strong business and provides Tata Tea an opportunity to be present in the unfolding crossover space in the beverages market. We believe that the whole Glacéau product line of Vitaminwater, Smartwater and Fruitwater will help us expand our beverage business in North America,” Krishna Kumar said.

The Tata Sons director parried reporters’ queries on the possibility of the Tata group raising its stake in Glacéau.

At present, 50 per cent of Glacéau is being held by its promoters, friends and associates, while the remaining 20 per cent is held through a number of venture capital funds.

Market circles do not rule out the possibility of the Tatas first buying out the stake held by these venture capital funds, who may choose to exit in the coming months.

The Tata Tea vice-chairman, however, said Glacéau may come out with an initial public offering (IPO) over the next two years.

He added that it would take at least two years for Glacéau’s products to come to India as the first priority of the company is to strengthen its presence in the US market. Tata Tea balance sheet will be boosted from the dividend that flows from this investment, he added.

It was more than a year ago that Krishna Kumar had revealed that the company was zeroing in on a $1-billion overseas acquisition of either a brand or company or both with a strong presence in the US or Latin America.

While the $677 million may not be equivalent to the amount that Krishna Kumar had told newspersons last year after the company’s annual general meeting, a closer look at the acquisition reveals the significance of this buy. A 30 per cent stake for $677 million, values the company at a whopping $3 billion.

Ratan Tata’s foray on the global map can be traced back to February 2000 when Tata Tea acquired the Tetley Group of the UK for a sum of £271 million.

It was the first major cross-border acquisition by an Indian group. After this buyout, Tata Tea, along with its subsidiary companies, now has a significant presence in over 35 countries worldwide, thereby making the group the truly Indian multinational corporation.

Observers of the Tata group say hospitality, automobiles, steel, information technology and beverages are the five key areas where Ratan Tata has made his mark with some headline grabbing acquisitions.

The year 2005 saw the maximum number of acquisitions. Incidentally, this was the year when the government removed restrictions on overseas buyouts. Beginning from 12 million euros that Tata Motors forked out for a stake in Hispano Carrocera, the largest acquisition during the calendar year came when Tata Steel bought Millennium Steel of Thailand for Rs 765 crore.

During the preceding year, the group also made some critical acquisitions. That includes the steel business of NatSteel for Rs 1,313 crore and that of Tyco Global Network by VSNL for Rs 585 crore. VSNL, which itself was acquired by the group from the government for Rs 1,439 crore in 2002, bought Teleglobe International Holdings Ltd for Rs 1,076 crore. Since the Tetley acquisition, the Tatas have so far made 25 acquisitions of which there were around eight domestic takeovers.

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