Acquisition to be routed through SPV

MUMBAI: The $677m deal to acquire a 30% stake in Energy Brands (EBI), will be done through Tata Tea GB, a subsidiary of Tata Tea, which was set up initially as a special purpose vehicle to acquire Tetley.

Tata Tea GB will be funding the investment through an equity contribution of $250m from its promoters and will raise debt to fund the remaining portion. Of the equity contribution, Tata Tea will contribute $192m while Tata Sons will chip in with $58m. The debt to equity for the transaction thus works out to 2:1.

The management is considering various options of debt to minimise the impact on Tata Tea GB. There is already structured debt on Tata Tea GB’s books due to the Tetley deal, and this would be refinanced and expanded.

Since Tata Tea owns only a 30% stake, the financials of EBI will not be consolidated on a normal basis, that is on a line by line basis. Thus, the sales of EBI will not reflect in Tata Tea’s consolidated financials.