Tata Global Beverages and Tata Chemicals to Merge Their Consumer Businesses
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Tata Global Beverages Ltd shares jumped as much as 10.5% in intraday trade on Thursday, while those of Tata Chemicals Ltd surged 8.8% as markets cheered Tata Group’s move to bring all its consumer businesses under one unit.
Tata Global Beverages was trading at Rs 217.45, up 9.1%, while Tata Chemicals stock was up 7.8% to Rs 600.25.
Tata Group on Wednesday said that it was transferring all its branded food businesses from Tata Chemicals to Tata Global Beverages. The consumer product businesses of Tata Chemicals comprise of Tata Salt, Tata Sampann (which sells spices, pulses and snacks) and also the lesser-known Tata Dx (a detergent brand).
Post-restructuring, Tata Global Beverages will be renamed Tata Consumer Products Ltd. The new entity will have a turnover of Rs 9,099 crore (25% more than that of Tata Global), with earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 1,154 crore.
According to the scheme, 114 shares of Tata Global will be issued for every 100 shares of Tata Chemicals. After the deal announcement, Deutsche Bank raised its target price on the Tata Chemicals stock to Rs 715 from Rs 695 earlier, while maintaining its buy rating.
Deutsche Bank said the deal unlocks consumer business valuation. It likes the merger for the strong brand value of Tata Salt. Strong distribution capabilities can also be leveraged by the combined business, said Deutsche Bank. “The transaction EV (enterprise value) of Rs 5,800 crore is 10% higher than what we had built into the target,” said the note by the investment bank.
Deutsche Bank also maintained its hold rating on Tata Global Beverages with a target of Rs 240 per share.