The boards of Tata Global Beverages (TGBL) and Tata Chemicals (TCL), at their respective meetings on Wednesday, have approved the demerger of the consumer products business of TCL and merging it with TGBL through a National Company Law Tribunal (NCLT)-approved scheme of arrangement to create one consumer products company, which will have a combined turnover and EBITDA of ₹9,099 crore and ₹1,154 crore, respectively.

Merger ratio

“As per the demerger scheme, each shareholder of TCL will get 1.14 new equity shares of TGBL for every one equity share held in TCL.

“The respective boards have approved the entitlement ratio based on the recommendations of independent valuers,” said the company in a statement.

Commenting on the demerger, N Chandrasekaran, chairman, Tata Sons, said, “Tata Consumer Products (the new avatar of TGBL) consolidates our current presence in food and beverages in the fast-growing consumer sector. Through this combination, we have created a strong growth platform to meet the growing aspirations of Indian consumers.”

The combination of the two consumer-focused businesses will benefit both sets of shareholders who would be able to participate in a larger business poised to grow their share of the foods and beverages market with a ‘broader exposure to the attractive and fast growing FMCG sector’.

Ajoy Misra, managing director and CEO, TGBL, said, “This transaction is consistent with our strategy to deepen our India presence and transform into a broader FMCG player.

“Existing TGBL shareholders will benefit significantly as the consumer products business increases our exposure to high growth product categories and provides a strong platform to seize new opportunities in this sector. We will also continue to nurture and grow our global brands.”

Tata Chemicals’ shareholders would retain their ownership of a focused science-led chemistry solutions and specialty products company with a leading portfolio of products in basic and specialty chemicals and strong cash flows to support future growth.

‘Unlocks value’

“This combination provides significant benefits to our shareholders by unlocking the value of our consumer products business. In line with its strategy to be a leading science-based solutions company, Tata Chemicals would aggressively grow its specialty chemistry business in the areas of agro-science, nutrition science, material science and energy storage Science,” Tata Chemicals MD and CEO R. Mukundan.

He added that the basic chemistry business of Tata Chemicals will be the global partner of choice for soda ash, salt and bicarbonate to leading brands of food, pharma, detergents and glass.

The combined consumer business would also benefit from a combined reach of over 200 million households, a broader portfolio to deepen distribution, enhanced innovation capabilities, as well as a strong product pipeline.

In addition, the new consumer entity expects to achieve substantial revenue and cost synergies which will add value to its shareholders, according to the statement.

The transaction is expected to be completed by the fourth quarter of this fiscal or the first quarter of the next fiscal.

Shares of Tata Global Beverages closed down 0.8% at ₹198.75 in a weak Mumbai market on Wednesday, valuing the company at ₹12,543.70 crore. Meanwhile, the shares of Tata Chemicals closed down 2.86% at ₹557.40, valuing the company at ₹14,200 crore.