Tata Tea eyes 42% stake in Himalayan

Last September when Tata Tea met analysts to discuss their $677 million Glaceau acquisition, bottles of Himalayan mineral water on the dais were hurriedly replaced with Glaceau's Vitamin Water. Himalayan could be back on stage tomorrow when Tata Tea meets the media to announce its March quarter and annual results. The Tata Tea board meeting tomorrow is expected to pass a resolution for the Mount Everest (Himalayan's parent) acquisition.

A week after Tata Tea's exit from Glaceau, in a $1.2 billion stake sale to Coca-Cola, unconfirmed reports said that Tata Tea is likely to pick up 42 per cent in Mount Everest Mineral Water. Owned by NRI Dadi Balsara, Mount Everest is reportedly offloading 11 per cent stake to Tata Tea at Rs 145-150 per share. As of December 31, 2006, promoters held 21.53 per cent stake in Mount Everest.

The remaining stake will be purchased by Tata Tea through an open offer. The deal is expected to cost Tata Tea roughly Rs 250 crore "" roughly one-tenth of the profits that the Tatas made through the Glaceau stake sale. The Tatas are also expected to get management control after the acquisition.

A Tata Tea spokesperson said the company would not comment on market speculation. Mount Everest executives could not be reached for comment. Last week, when Tata Tea Vice-Chairman RK Krishnakumar was speaking to the media, he did not deny that the Tatas were in talks to acquire Himalayan. When asked about how soon would Tata Tea make its next acquisition, Krishnakumar half-jokingly said, "we would like to announce a deal tomorrow."

The Mount Everest stock rose 5 per cent on the Bombay Stock Exchange to touch Rs 127.65 as volumes surged ten-fold to touch 12 lakh shares. The Tata Tea share was trading at Rs 908.50, a 3.63 per cent rise over its previous close.

The Himalayan brand, for which water is sourced from Himachal Pradesh, is among the brands exported to the US and sold in relatively lesser known supermarkets such as MARSH and pharmacies in the US. According to brand marketing experts, the Tatas could use the Himalayan connection to sell the brand on the "East is cool" platform.