Tatas pick up Eight O' Clock for $220 mn

The acquisition provides Tata Coffee an established brand in the $21-bn US coffee market.

Tata Coffee today announced that it had signed a definitive agreement to acquire US-based Eight O' Clock Coffee Company (EOC) from Gryphon Investors for $220 million (Rs 1,015 crore). Tata Coffee is a 51-per-cent-owned subsidiary of Tata Tea.

The EOC acquisition provides Tata Coffee a sizeable entry platform, and an established brand in the $21-billion (Rs 97,000 crore) US coffee market.

The acquisition, which will be financed through a combination of equity and non-recourse debt, is to be funded by Rabo Bank. JPMorgan acted as the exclusive financial advisor for the deal.

EOC is the number one player in the branded whole-bean market, and the category leader in the value gourmet segment of the US retail market.

Headquartered in Montvale, New Jersey, it operates its roasting and packaging facility in Landover, Maryland. In calendar year 2005, EOC had net sales of $109 million (Rs 505 crore), and an EBITDA of $27 million (Rs 125 crore).

Within the US food category, EOC is the third largest coffee brand by volume, behind Folgers and Maxwell House.

It also enjoys significant retail distribution strength, with approximately 67 per cent of all commodity volume penetration of the US retail coffee market.

The EOC buyout comes on the back of a number of other acquisitions by the company, namely Good Earth in the US, and JEMCA in Czech Republic. Following this acquisition, the group will have significant scale in all important markets in Asia, Europe, and North America.

Tata Coffee Chairman R K Krishna Kumar said he expected the Tata Tea group to become one of the largest beverage players in the world by the end of the decade. Managing Director M H Ashraff said the acquisition was a strategic fit with the company's global growth plans.

Eight O' Clock Coffee CEO Barbara Roth said, "with the backing of the Tata Group, we will be able to leverage our brand equity to capture new markets and new geographies."

For the year ended March 31, 2006, Tata Coffee recorded a net turnover of Rs 190 crore, and a net profit of Rs 22.6 crore ($5 million). Tata Tea recorded consolidated sales of Rs 3,240 crore and a net profit of Rs 305 crore.