The Hindu Business Line : Tata Coffee mulls SPV to fund Eight O'Clock buy

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Tata Coffee mulls SPV to fund Eight O'Clock buy

Vishwanath Kulkarni

Deal to be closed by July 31; EOC to be run as independent co

In the pipeline
Tata Coffee would bring in equity of $50 million into the SPV; the remaining $170 million would come in the form of foreign debt.
It plans to come out with a rights issue for raising $50 million.
Through this buy-out, Tata Coffee expects to enhance its reach in key markets like Russia and Eastern Europe.

Bangalore July 28

Tata Coffee plans to float a special purpose vehicle (SPV) for funding its leveraged buy-out of the US-based Eight O'Clock Coffee Company (EOC).

Tata Coffee recently signed a definitive agreement to acquire EOC from Gryphon Investors for $220 million (Rs 1,019.4 crore).

Speaking to Business Line, the Tata Coffee Managing Director, Mr M.H. Ashraff, said: "The details of the SPV are still being worked out and we have appointed a consultant for this." But, Mr Ashraff said that Tata Coffee would bring in equity of $50 million into the SPV. The remaining $170 million would come in the form of foreign debt. Rabo Bank is syndicating this debt, Mr Ashraff said.

Tata Coffee plans to come out with a rights issue for raising the required $50 million, for which the details are being worked out, Mr Ashraff said. Tata Coffee plans to run EOC as an independent company, on the lines of Tata Tetley, he said.

Mr Ashraff said the deal would be closed by July 31. EOC provides a sizeable entry platform and an established brand to Tata Coffee in the US market. Further, through this buy-out, Tata Coffee expects to enhance its reach in key markets like Russia and Eastern Europe among other countries.

Top player

EOC has over 100 years of brand history and retail coffee experience in the US. It is a top player in the branded whole bean market and the category leader in the value gourmet segment in the retail market.

Headquartered in Montavale, New Jersey, EOC operates its roasting and packaging facility in Landover, Maryland.

In calendar 2005, EOC had net sales of $109 million (Rs 504.8 crore) and EBITDA of $27 million (Rs 125 crore).

Tata Coffee recently floated Alliance Coffee Ltd, a marketing joint venture with Beeyu Overseas Ltd for sale of its instant coffee products in the global market.

The company expects to leverage on Beeyu's reach in markets like Russia and Commonwealth of Independent States to expand its reach.

Tata Coffee recorded a net profit of Rs 22.6 crore on revenues of Rs 190 crore for fiscal 2006.