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Tata Tea makes $523-m profit with Glaceau sale

Tata Tea has agreed to sell its 30 per cent equity stake in the US-based Energy BrandsInc which owns the Glaceau brands of beverages to Coca-Cola for $1.2 billion,pocketing a neat profit of about $523 million (about Rs 2,106 crore) in less than a year of

its acquisition.

The deal follows Coca-Cola's decision to acquire the US company for $4.1 billion.

Tata Tea, through its indirect UK subsidiary, Tata Tea (GB) Investments Ltd, had pickedup 30 per cent stake in Glaceau in August last year for $677 million, based on anenterprise valuation of $2.2 billion for the US company.

Coca-Cola, which had been eying Glaceau for quite some time, on Friday announced thatit has reached an agreement to acquire the company and its full range of enhanced waterbrands for $4.1 billion in cash, including Tata's minority holding.

`Conditional' nod

Tata Tea said it has `conditionally' agreed to sell its shares by the end of the year for $1.2billion, which is subject to adjustment for certain transaction and other costs.

The consideration reflects an underlying enterprise value of $4.2 billion for Glaceau, thecompany said in a notice to the stock exchanges. Tatas decided to exit Glaceau as theydid not wish to remain as a minority partner with Coca-Cola.

In a tele-conference with the media, Mr R.K. Krishna Kumar, Tata Tea's Vice-Chairman,

unequivocally said that it was not selling its stake in Glaceau under any pressure and thatthe move was purely a strategic financial decision.

Tate Tea shares closed at Rs 913.63 on the BSE on Friday, up by 3.98 per cent from theprevious close of Rs 878.70. In the last week, the company's shares rose by 8.45 per cent.

He said the capital gains that the company expected to make out of the sale would beused to either make Tetley Tea debt-free or make other acquisitions across variousgeographies.

Open to more buys

He made it clear that even after the exit from Glaceau, Tata Tea's US plans remainedunchanged. "We are open to buying companies that fit our architecture," he said.

In fact, the Glaceau stake acquisition was intended to be the platform for Tata Tea toexpand its footprint in the US market, with the company even considering increasing itsholding at one stage.


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Replying to a question, Mr Krishna Kumar said the company's future acquisitions wouldfocus on buying only majority stakes.

Titan's Foray into the Prescription Eyewear Market in India

In early 2007, the prescription eyewear market in India was estimated to be worthbetween Rs 18-20 billion,1 with around 30 million pieces (frames with glasses) being soldevery year2.

It was also one of the fastest growing consumer segments in the country in the early2000s, recording an average annual growth rate of around 25%.3

This segment however, was largely dominated by the unorganized sector, whichaccounted for 95% of the prescription eyewear business.4

Firms like Lawrence & Mayo and GKB Opticals were some of the well establishedrepresentatives of the organized sector in the business, but their presence was limited to

only a handful of stores in a few big cities.

In early 2007, Lawrence & Mayo had 41 stores in 17 cities across India, while GKBopticals had 31 stores in 9 cities. Most of these stores were located in big cities likeDelhi, Kolkata, Mumbai, Chennai, Bangalore, Hyderabad, Pune and Visakhapatnam.

In March 2007, Titan Industries (Titan), a joint venture between the Tata Group, a majorindustrial conglomerate in India, and the Tamil Nadu Industrial DevelopmentCorporation (TIDCO), an industrial investment body set up by the Tamil Nadu stategovernment, announced its venture into the prescription eyewear business. Titan wasalready a well established brand in the watches and jewelry segments in India.

Titan had ventured into the wrist watch segment in 1984, and is thought to have played amajor role in transforming watches into fashion accessories in the Indian market. Also,Titan's jewelry brand Tanishq, when it was launched in 1995, was one of the first jewelrybrands in India, and rapidly established itself in a segment that was largely dominated bythe unorganized sector. Along similar lines, Titan sought to take advantage of the largemarket for eyewear through its new stores, which were to operate under the name TitanEye+ (Eye+).

In April 2007, Titan opened two Eye + stores in Bangalore. The company planned toopen a total of ten stores spread across Nagpur, Chennai and Bangalore, by the end of the

2007. The plan was to eventually open 150 Eye+ stores and 100 franchisee outlets by2010. These stores were to be opened mainly in A and B segment towns.

Bhaskar Bhat (Bhat), the Managing Director of Titan said that Titan would be investingRs 150-200 million initially for setting up the Eye+ stores, and expected revenues of Rs150 million from the stores in 2007-2008. The company expected the eyewear business tocontribute 15 per cent of its total turnover by 2012. It hoped to capture a 20% marketshare by the same time.5
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Eye+ stores sold frames under the Titan brand as well as the Eye+ and Dash brands (theDash brand was for children). The stores also sold frames and sunglasses from a largenumber of international fashion brands like Elle, Vogue, Versace, Dior, Steppers, HugoBoss, Armani, Levis, Esprit, Oxydo, Tommy Hilfiger, Dolce & Gabbana, Calvin Klein,

Silhouette, Swarovski, Dunhill and Mont Blanc.Titan had tied up with Essilor India, a subsidiary of Essilor SA of France, for the supplyof optical lenses. Eye+ stores targeted the mid-market segment and offered lenses withprices ranging from Rs 145 to 21,000. The stores offered frames priced in the range of Rs395 to 20,000. Eye+ stores also sold contact lens under the company's own brand andother established brands like Bausch & Lomb, Johnson & Johnson (J&J) and Silklens.

Eye+ stores provided both eye-check and style consultancy services. The stores hadrefraction labs for zero-error prescription and offered warranties on all the products theysold. Unlike ordinary optical shops where the optician played a dominant role, the Eye+stores tried to involve the customer at every stage of selecting a frame/lens. The

customers were encouraged to browse through the different frames available in the storeand select the one which they found most suitable.

The Eye+ stores in Bangalore had separate sections for men, women and children. In thechildren's section, the mirrors were placed at a lower height. The stores also had playareas for children. Titan had given a lot of importance to store ambience, and hademployed a design firm to select the lighting, flooring, forms, shapes and colors used inthe stores. The head of the designing firm said that they had tried to bring in a'cosmeceutical'6 appeal to the store.

Titan felt that customers were largely unaware about products, features/ benefits, quality,brands when it came to prescription eyewear. The company wanted to make thecustomers conscious about such factors, and develop a market for branded eyewear. Bhatwas confident that the Eye+ stores would be successful, as the prescription eyewearmarket was fragmented, and there were no clear leaders in the segment. Titan alsoclaimed that there was no transparency in pricing when it came to buying prescriptioneyewear in the unorganized sector. But in the case of a store like Eye+ customers couldbe confident that the products they bought were of good quality and fairly priced.

Titan's plan was to gain a leadership position in the segment by leveraging its well-established retail network and design and marketing capabilities. Titan also felt that withits previous experience of converting products like watches and jewelry into fashionaccessories, it could bring about a similar shift in the customers' mind when it came toprescription eyewear. Bhat said that most of the business for the Eye+ stores was likely tocome from customers who viewed glasses as a tool for personality enhancement.Whether Titan would have the same success with eyewear as it had had with watches andjewelry however, remains to be seen.

Bharti Airtel closes $9 bln Zain Africa deal
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(Reuters) - Bharti Airtel has completed its $9 billion acquisition of African operationsfrom Kuwait's Zain in a deal that makes the Indian firm the world's fifth biggestcellphone company by subscribers.

Bharti aims to have 100 million subscribers and $5 billion a year in revenue in Africa by2012/13, Manoj Kohli, chief executive of its international unit, said on Tuesday.

Currently Zain Africa has 42 million subscribers and an annual revenue of $3.6 billion.

Zain said in a statement on Tuesday it has received $7.87 billion from Bharti and willreceive a further $400 million within 12 months after completing other formalrequirements. It will also receive another $700 million after one year of the deal closing,as agreed in March.

In return Bharti gets the Kuwaiti company's mobile operations in 15 African countries,making it India's second biggest overseas acquisition after Tata Steel's $13 billion buy ofCorus in 2007.

The Indian telecoms market leader is facing ferocious competition at home and betting on

opportunities in Africa are worth the risks of operating there, analysts say, even thoughsome regard the deal's total enterprise value of $10.7 billion including the assumption of$1.7 billion debt as a full price.

The acquisition, which takes Bharti's subscriber base to 180 million in 18 countries,brings tough financial and management challenges for a company battling to defend itslead in its home market, analysts say.

A big challenge will be to streamline operations across the 15 different countries inAfrica, raise the revenue and turn around the loss-making assets.

Reviving growth in Africa is a "big agenda," Kohli said.

For Zain profits from the Bharti deal will be booked in the second quarter, ChiefExecutive Nabeel bin Salama said, and a dividend will be paid in 2011, with Zain's boardto recommend a dividend of 200-240 fils per share from deal returns. The company is notin talks for further asset sales, he added.

SECOND CHANCE

Bharti, which is 32 percent owned by Singapore Telecommunications Ltd, looked to Zainfor building a major presence in Africa only after it twice failed to finalise tie-ups withSouth Africa's MTN Group Ltd, the continent's biggest operator.

"We were fortunate that we got a second chance, and a better chance," Sunil Mittal,

chairman of Bharti Airtel, said.

The deal with Zain still encountered obstacles, including a dispute about the minorityownership of Zain's operations in Nigeria, the biggest market in the deal, but Bharti saidon Tuesday it had settled a dispute with one of Zain Nigeria's minority shareholders,Broad Communications Group.

Oba Otudeko, who controls Broad Communications, will be made chairman of theNigerian operations.
http://in.reuters.com/finance/stocks/overview?symbol=BRTI.BO&exchange=INBhttp://in.reuters.com/finance/stocks/overview?symbol=BRTI.BO&exchange=INB


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Another firm, Econet, which owns 5 percent of the Nigeria unit, has been seeking tooverturn a 2006 deal whereby Zain -- then called Celtel -- bought a majority stake inNigerian mobile operator Vee Networks Ltd, now Zain Nigeria.

Mittal said Econet has had no contact with Bharti, but he did not see Econet posing aproblem for operations in Nigeria.

Econet, however, said in a statement on Tuesday the dispute was not yet resolved andthat it was not party to any agreement between Zain and Bharti.

Bharti secured debt of up to $8.5 billion from a clutch of lenders to fund the Zain dealand may have to spend more to expand networks that analysts say have been under-invested in for years.

Bharti recently paid about $2.6 billion for acquiring 3G licences in India and will have topay more once an auction for wireless broadband radio spectrum is completed.

Shares in Bharti closed down 3.8 percent at 257.80 rupees, in a Mumbai market that fellalmost 1 percent.

Bharti was advised by Standard Chartered, Barclays, SBI Group and Global InvestmentHouse. Zain was advised by UBS.

Standard Chartered, Barclays, SBI and Bank of America Merrill Lynch are amongBharti's financiers for the deal.
http://in.reuters.com/finance/stocks/overview?symbol=SBI.BO&exchange=INBhttp://in.reuters.com/finance/stocks/overview?symbol=SBI.BO&exchange=INB

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