Food giant Nestle has joined the race to buy Tetley Group, the British tea and coffee maker.
Nestle, which has a bulging war chest for acquisitions, would be a formidable rival to Tata Tea and Sara Lee, which have been the front-runners in the bidding war so far.
Nestle's entry into the race was reported by The Sunday Times. However, Tetley denies that it has received any overtures from Nestle.
"Maybe they will come forward with a proposal but there have been no talks so far," a Tetley spokesman said. Tetley's key shareholders are hoping to sell out for about œ300 million, according to reliable reports.
The Tetley spokesman said that talks with potential buyers were still at an early stage. "We have had approaches from a number of parties but none have progressed beyond initial discussions."
PG Tips, a Unilever brand, and Tetley are the leading sellers of teabags in the United Kingdom. Both brands have about 20 per cent of the teabag market. However, the tea industry has been affected by price wars, which broke out in recent months. "There has been a lot of price competition in the UK tea business, which was not there before," an analyst said.
Tata Tea and Sara Lee have held talks with Tetley but were unable to conclude a deal. Sara Lee has the reputation in the international market of stalking distressed companies and buying them at rockbottom prices. As such, it may not be interested in paying a hefty premium price for Tetley.
Tata Tea is keen to bag Tetley but it reportedly faces difficulty in raising cash for the deal. "Tata Tea has looked at Tetley before. There have always been financing issues," an industry analyst said.
Meanwhile, there are indications that long-term planning at Tetley has come to a halt amidst speculation about an imminent takeover. The company's day-to-day marketing plans continue as usual, but it has not drawn up detailed long-term marketing plans for the future.
Tetley's largest shareholders are Schroder Ventures and PPM Ventures. The latter is the venture capital arm of Prudential Corporation. <