Boston To Pen Tata Tea-Tetley Merger Script

Tata Tea has appointed Boston Consulting Group (BCG) to pen the operational integration of Tetley with itself.

R K Krishnakumar, vice-chairman, Tata Tea, said BCG would conduct a thorough study of both the companies and identify steps which would help both the companies grow functionally. "We will chalk out ways to grow business in new categories and product segments," he said.

The study would be done in phases. "It would be an ongoing study. The first phase would commence in the latter half of January," said Krishnakumar.

The first phase entails understanding the organisations, identifying the areas of synergy and drafting the common vision of the larger organisation with its two components -- Tata Tea and Tetley.

This would apply only operationally, said Krishnakumar. At the end of the first phase, a common management structure would also emerge.

The second phase would be a detailed plan of the networking and co-ordination required between the two companies which would help them function as a single entity. It would be devoted to actually working together to capture these synergies.

The only areas where Tata Tea and Tetley have worked closely together are tea buying and blending. Tetley buys around 8,000,000 kg of Indian tea per year. Tata Tea buyers would have to be trained to know exactly what Tetley is looking for in terms of quality and prices of tea required for their blend.

Tata Tea is planning to launch the Tetley brand at the premium end of the domestic market. The brand would then be extended jointly to developing markets in western Asia and Russia. The Tetley portfolio comprises flavoured teas, herbal teas, organic teas and decaffeinated teas.

Despite the gloom in the tea industry, the Tata Tea scrip has been active on the stock exchanges.

The scrip touched a high of Rs 176.60 today and then finally closed at Rs 175.25 on the Bombay Stock Exchange (BSE) and at Rs 176.25 on the National Stock Exchange (NSE). Volumes traded were significant at 1,61,061 and 2,57,974 on BSE and NSE, respectively.

Krishnakumar dismissed rumours of management buying and said that investors have finally realised that the stock is undervalued, given the performance of the company vis-a-vis peer companies.