Dec 5, 2018
Tata Sons has rejected a proposal by the group’s mergers & acquisitions team for Tata Global Beverages to purchase Prabhat Dairy for about Rs 400 crore, as the board did not see it significant enough to scale up the business in the challenging dairy sector, and instead asked Tata Global Beverages to focus on its core business.
The Tata Sons board had earlier sought a due diligence report on a proposal to purchase cash-starved Jet Airways before taking up the plan for consideration. The board, headed by N. Chandrasekaran, discussed both proposals on November 16.
The board of Tata Sons is asking tough questions on deals placed before it for approval by the new M&A team. The core value is to focus on scaleable businesses, keeping the institution’s values and long-term growth in mind. Deals cannot be of a limited transactional nature. Tata Global Beverages sells tea, coffee and water and has brands such as Tetley. It sells Himalayan Natural Mineral Water in a joint venture with PepsiCo and is the partner of Starbucks in India. Tea accounted for 80% of its revenue from branded business in the September quarter.
Analysts said Tata Global’s previous acquisitions have not been very successful and Prabhat Dairy, based in Navi Mumbai, is not a fit. It has taken the company 15 years to struggle in tea, venture and exit from markets such as China and Russia.
If the Indian giant company has to get into dairy, it has to be a big brand and Prabhat does not fit into that slot… the biggest brands in dairy are Amul and Mother Dairy and both are run by cooperatives.
Tata Global Beverages recently moved operations such as global information systems, HR, finance and commercial in regions including India, the UK, the US, Canada and Australia to the managed services of Tata Consultancy Services in Kolkata.