Tata Coffee has signed an agreement for acquisition of Eight OClock Coffee (EOC) Company of the US from private equity firm, Gryphon Investors, for a total price of Rs 1,015 crore or $220 million.
The acquisition would be funded through a combination of equity and non-recourse debt. Non-recourse implied that the entire borrowing was on a stand-alone basis. The advisor for the acquisition was J.P. Morgan.
The acquisition cost is more than the net worth of Tata Coffee as on March 2006. As on March FY 06, Tata Coffees paid-up equity was Rs 12.47 crore and the net worth was Rs 186 crore.
The acquisition provides Tata Coffee a substantial beachhead into the $21-billion US coffee market. Headquartered in Montvale, New Jersey, EOC is the third largest coffee brand by volume behind Folgers and Maxwell House. EOC enjoys a 67 per cent penetration of the US retail coffee market. EOC had net sales of $109 million (Rs 505 crore). The company had an earnings before interest, tax, depreciation and amortisation of $27 million (Rs 125 crore).
Tata Tea, the parent company of Tata Coffee, had recently acquired Tetley, Good Earth in the US and JEMCA in Czech Republic.