High price forces Tata Tea to exit race for Van Houtte

Tata Coffee has walked out of the race to acquire Canada's leading coffee company Van Houtte as it found the valuation too high.

A Tata Coffee executive said the company "had a look at the assets and decided not to go ahead."

Investment bankers said the rationale behind Tata Tea's, the parent company, withdrawal from the $500-million auction of the Montreal-based company is due to higher valuation.

The $378 million company was expecting a price tag of $500 million.

Besides the Tatas, other bidders for Van Houtte, which was put up for sale in January, included French food services firm Sodexho Alliance, Vermont-based Green Mountain Coffee Roasters and Italy's Segafredo Zanetti.

With two business lines, the Toronto Stock Exchange-listed company employees 1,900 hands: It is into coffee roasting, supermarket distribution and cafés under its own banner and supplies coffee to 74,000 workplaces in Canada and the United States.

Tata Coffee and Tata Tea have been focusing on the branded business. Between them, they shared four acquisitions last year.

Tata Coffee acquired Eight O'Clock Coffee Company (EOC) for $220 million which provided Tata Coffee an entry platform into the $21-billion US coffee market.

The EOC acquisition was in line with the vision of the Tata Tea to become a global beverage player.

It follows a string of acquisitions by the group, Good Earth in the US, and JEMCA in the Czech Republic.

One of the biggest investments in recent times from the Tata Tea stable was the 30 per cent stake buyout in Glaceau for $677 million.

The stake was held by TSG Consumer Partners.

Tata Tea has been buying global firms since the acquisition of The Tetley Group, which was the largest crossborder acquisition in its time and India's first leveraged buyout.