Apeejay buys Premier's teas

Rs 629 cr deal for Typhoo, other brands.

In one of the biggest acquisitions in the packet tea segment by an Indian business house, the Apeejay Surrendra group has bought the entire tea business of Premier Foods for £80 million (Rs 629 crore).

The acquisition was made by Apeejay International Tea Limited, a subsidiary of the Apeejay Surrendra group.

Apeejay Surrendra group Chairman Karan Paul said the deal would be financed through a mix of debt and equity. He, however, did not give details.

He said the group's listed tea company would pick up 33 per cent in a special purpose vehicle that would be floated for the acquisition.

"While it will not get the benefits of consolidation of accounts, the group's listed tea company will gain immensely in terms of access to security of supply and sharing of expertise, people and resources," he said.

The grades of tea produced by the group would fit in nicely with the brands being acquired, he added.

The business being acquired includes the 100-year old iconic brand Typhoo, London Fruit & Herb, Lift, and other associated brands.

Business Standard was the first to report on October 1 that Apeejay was close to acquiring the entire tea business of Premier Foods, which included Typhoo.

Other brands included in the sale are Natureland and Health & Heather fruit and herb tea brands for the export and health foods markets. Also being sold are Freshbrew, Glengettie, Melroses and Ridgeways regional and speciality teas.

Apeejay is also acquiring Premier's tea blending and packing facility at Moreton, Wirral, which employs 249 people. However, Apeejay does not expect any redundancies at the Moreton plant as part of the transaction and anticipates recruiting employees for a range of functions in the near future.

According to the contours of the agreement, Premier will provide services to Apeejay following the completion of the deal, including transitional, commercial and administrative support, and logistics and the manufacture of Lift and Typhoo QT instant teas.

The tea business of Premier Foods had net sales of 70.2 million pounds (Rs 552 crore) and an operating profit of 11.2 million pounds (Rs 88 crore) on December 31, 2004. The book value of the assets being sold were 25.7 million pounds (Rs 202 crore) on July 2, 2005.

A Premier Foods press release said, the consideration would be paid in cash and the transaction was expected to be completed shortly.

Premier will use the proceeds to reduce net debt.

Robert Schofield, chief executive of Premier, said, 'Typhoo is a great brands but after a thorough review, we believe it will benefit from the focus and investment a vertically integrated tea business like Apeejay can bring. Our strategy is to drive growth through the active management of our brand portfolio, focusing on those brands with leading market positions.'