Norwegian conglomerate Orkla which owns MTR Foods has entered an agreement to buy a majority stake in Kerala’s largest spice player Eastern Condiments for Rs 2,000 crore with an aim to double up its spice presence in India.
The conglomerate had acquired MTR Foods in 2007, which already has a strong presence in the spice market and a current turnover of Rs 920 crore.
Orkla, through its wholly owned subsidiary MTR Foods, has signed agreements to purchase a 41.8 per cent ownership stake in Eastern from members of the Meeran family and to acquire the entire ownership stake held by McCormick Ingredients, which will give the Norweigian firm a 67.8 per cent ownership stake after completion of the transactions. Eastern is currently owned by the Meeran family which holds 74 per cent stake and McCormick which holds 26 per cent share in the company.
Following completion of these transactions, Eastern will be merged with MTR. The merged company will be jointly owned by Orkla and Firoz and Navas Meeran of Eastern Condiments, with an ownership stake of 90.01 per cent and 9.99 per cent, respectively. The merger process is expected to take approximately 15 months after completion of the acquisition.
“This announcement marks a significant step for Orkla towards delivering on its strategy to strengthen our footprint in our core geographies. By joining forces, Eastern and MTR will create a solid platform in the fast-growing Indian market, based on strong local brands”, said Orkla President & CEO Jaan Ivar Semlitsch. After it got acquired by Orkla, MTR has seen a five-fold growth in its turnover and is eyeing a Rs 1,000 crore revenue target by year end.
“The Indian branded food and spice markets are growing by double digits, and we see positive long-term demand dynamics with increasing purchasing power and more urban lifestyles. We are looking forward to this new partnership,” said Sanjay Sharma, CEO of MTR.
While Eastern offers a mix of non-vegetarian and vegetarian food products largely in the categories of blended and single spices, MTR will continue to have a purely vegetarian product range in spices and packaged foods.
Eastern, which was started in the early 80s has a current turnover of Rs 900 crore. About half of the Kochi-based company’s turnover is generated in Kerala, with the remaining revenue stemming equally from across India and exports. The agreement with the Meeran brothers includes a long-term mechanism for Orkla to obtain full ownership of the joint entity.
The spice market has been seeing a slew of mergers and acquisitions as consumers move from non-branded to branded products.
Kolkata-headquartered ITC in July had announced acquisition of spices manufacturer Sunrise Foods, which is a market leader in Eastern India, in an all-cash deal valued at Rs 2,150 crore.
“The spices industry has a long runway for growth in India, with a shift from home processed to branded spices driven by convenience and hygiene preferences. Eastern and MTR combined, have significant synergy potential in terms of product portfolio and geography,” said Anshul Agarwal, executive director, consumer and financial services, Avendus Capital.