Kochi: Norwegian food conglomerate Orkla ASA is buying 67.8 per cent stakes in Kerala-based Eastern Condiments at a cost of Rs.1,356 crore.
The Indian runner of the deal will be MTR, a completely owned subsidiary of Orkla. Sources said plans were afoot to merge Eastern in MTR.
The Meeran family, which owned Eastern, had 74 per cent stakes. The rest of the 26 per cent is with US firm McCormick, a food and flavouring major.
For the stake buyout, the total worth of Eastern was put at Rs.2,000 crore. Orka will buy 41.8 per cent stakes from the family for Rs.836 crore and 26 per cent from McCormick for Rs.520 crore. After the stake buyout, the MTR-Eastern merger will take place. In the new, merged firm, Orkla’s stake share will be 90.01 per cent and the Navaz-Firoz Meeran brothers will have 9.99 percent stake.
Orkla expects to double its business in the country with the acquisition. In the market Eastern brings out vegetarian and non-vegetarian products whereas MTR pushes out vegetarian food items alone.
History of Eastern
Eastern Condiments was born in 1983 out of a humble provision and essentials business started by M.E. Meeran in 1968 in Adimali. The present annual turnover of the Edapally-based company is Rs.900 crore. The average growth per year is eight per cent. Half of the turnover comes from sales in Kerala and the rest from other states and abroad. The company, with 2955 employees, has seven manufacturing units in four states. McCormick bought 26 per cent stakes in Eastern for Rs.3.5 crore in 2010.
MTR, which was founded in Bangalore, in 1924 was bought by Orkla in 2007. The products are sold in 32 countries and there are two manufacturing units, in Bengaluru and Pune. There are 1018 employees.
Great opportunity ahead: Navas Meeran
The Orkla stake buyout will open a world of opportunity for the brand, Eastern Group chairman Navas Meeran told Manorama. The present leadership of Eastern will stay and the headquarters will continue to be in Kochi. Navas Meeran’s brother Firoz Meeran is the managing director of the company.
Navas Meeran expressed hope that the Orkla association will help in bringing out new products and reaching out to new markets.
The twin advantage would be that Eastern would be able to explore European markets and the international products of Orkla could be made available in the domestic circuit.
The entire stake buyout and merger will take 18 months. Orkla will buy Eastern in an all-cash deal and the MTR-Eastern merger will be through share transfers. After the initial buying of stakes by Orkla, the Meeran siblings will be left with 32.2 per cent stakes in Eastern. In lieu of this, they will get 9.99 per cent stakes in the company formed out of the MTR-Eastern merger.