The acquisition of the US-based Energy Brands Inc., by Tata Tea, the world's second largest tea company marks its maiden foray into the fast growing `enhanced water' market.

Six years ago when big-ticket cross-border deals were almost unthinkable for India Inc., it was Tata Tea, India's home-grown tea maker that could do the improbable when it acquired the world's second largest tea brand, the UK-based Tetley, a much bigger firm in terms of revenues compared to the former. After successfully acquiring and running Tetley, the company is once again at it. In the biggest ever cross-border deal by any Indian firm, Tata Tea in August this year, announced to acquire a stake of 30% in Energy Brands Inc., (EBI) for a sum of $677 mn (Rs. 3,150 cr). Tata Tea had acquired Tetley for $432 mn in 2000. Tata Tea would invest $192 mn (approx. Rs. 890 cr) and Tata Sons $58 mn, in the form of equity in its UK-based subsidiary, Tata Tea (GB), through which the acquisition would be routed. Further, Tata Tea announced that it will sell a 10% stake to Tata Sons to raise Rs. 420 cr to Rs. 460 cr. It would raise the remaining Rs. 470 cr through internal accruals. The acquisition of EBI, which is a major player in the market for enhanced or fortified water (an emerging segment where companies add in water, stuff like vitamins, herbs, and other nutrients that are known to energize, increase endurance, reduce stress and improve concentration and alertness), and owns fast-growing brands such as Glaceau vitaminwater, acts as a gateway for the Indian firm to make a foray into the fast growing `enhanced water' market in the US.

The deal, however, has come as a surprise with a section of experts even asking what a tea maker has to do with (fortified) water business, where it does not have any prior experience. However, there is one strong reason which brought the two firms to the deal table: "Convergence." "Like in telecom where there is convergence of technology, we see the same thing between tea and enhanced water," remarked RK Krishna Kumar, Vice-Chairman of Tata Tea. "Glaceau is part of a very exciting, strong business. The acquisition provides Tata Tea an opportunity to be present in the unfolding crossover space in the beverages market. We believe that the whole Glaceau product line will help us expand our beverage business in North America," he said in the company's press release.

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