Date:14/12/2005 URL: http://www.thehindubusinessline.com/2005/12/14/stories/2005121402580300.htm

Back McLeod Russel buys Doom Dooma Tea for Rs 69 crore

Our Bureau

Kolkata , Dec. 13

HINDUSTAN Lever Ltd (HLL) announced that it is selling off its Assam-based wholly owned subsidiary, Doom Dooma Tea Co Ltd, to McLeod Russel India Ltd (MRIL) for Rs 69 crore. On Tuesday, a formal Memorandum of Agreement was signed between the two companies. The transaction is expected to be completed by end-January, 2006.

Addressing a press conference from Mumbai, Mr Deepak Khaitan, Vice-Chairman of MRIL, said that the acquisition would be funded through debt and internal accruals in the ratio of 50:50. ICICI Securities was the merchant banker for MRIL, and DSP Merill Lynch represented HLL.

Initially, Doom Dooma would continue as a subsidiary of MRIL but would be merged with the company later, Mr Khaitan said. However, the details are yet to be worked out.

Doom Dooma, which was earlier known as HLL's Tea Plantation Division (Assam), has seven estates and three factories. Its annual capacity is six million kg. With this acquisition, MRIL's annual capacity would rise to 68 million kg.

In June 2005, MRIL acquired Williamson Tea Assam from the UK-based Magors. The total cost of this acquisition, along with the subsequent open offer, came to around Rs 208 crore.

According to Mr Khaitan, after these two major acquisitions, MRIL's debt burden would be around Rs 400 crore, and the company would be considering "several options" for reducing it. One such option is selling two or three of its weak Dooars gardens. MRIL also holds substantial investments in several companies. These could be offloaded too.

"We want to raise debt-free funds but may not go for equity because McLeod Russel's current capital base is already Rs 50 crore. A road map would be readied by us within the next three months," he said.

Talking on the Doom Dooma acquisition, Mr Khaitan said that the impact on MRIL's results would be felt from 2006-07. He appreciated the assets of Doom Dooma and added that the average age of the bushes is lower than that of MRIL's.

MRIL would now have a huge exposure in Assam but nothing in Darjeeling or South India. Mr Khaitan said that the company would not enter these two regions. When queried whether they are looking for overseas acquisitions, he said, "More opportunities are available in India than abroad."

On Doom Dooma, he said that there was some spare factory capacity and it would be utilised by MRIL's tea. The company is currently buying around five million kg of green tea, which might be increased to 10 million kg.