InvestorQ : I am a shareholder of Tata Coffee and now I understand that is being merged into Tata Consumer Products? I hold 220 shares of Tata Coffee, how many shares I get in swap?
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I am a shareholder of Tata Coffee and now I understand that is being merged into Tata Consumer Products? I hold 220 shares of Tata Coffee, how many shares I get in swap?

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swati Bakhda answered.
2 weeks ago
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Before I get into your specific question on the swap ratio, here is what you need to understand broadly about the merger and the justification for the same. Tata Consumer Products is the FMCG business of the Tata group and is gradually consolidating all FMCG businesses. It has already brought in tea, salt and food products and now plans to add coffee also to the list. That is where the merger of Tata Coffee and TCPL comes in.

The Tata group overall has been trying to realign its business along distinct business specialization. It has already streamlined all its diverse practices in defence, IT solutions and energy under classified segments. Now the next big segment is FMCG. It will now take on the well established FMCG players in the market by realigning. However, in the case of Tata Coffee, it will first demerge the plantations business and then integrate Tata Coffee.

Here is how it will work. First, the plantation business of Tata Coffee Ltd will be demerged and integrated into TCPL’s wholly-owned subsidiary, TCPL Beverages & Foods. The remaining businesses of Tata Coffee, which includes extraction and branded coffee, will directly merge into Tata Consumer Products (TCPL). For that even the swap ratio has been broker up into two separate parts. Here is how the swap ratio will play out.

Under the scheme of arrangement, firstly, the shareholders of Tata Coffee will be allotted 1 share of TCPL for every 22 shares held. This will be the compensation for the plantations business demerged. Then, for the residual merger, shareholders of Tata Coffee get 14 shares of TCPL for every 55 shares held. If you add up both these separate allotment ratios, the net effect will be that you get 3 shares of TCPL for every 10 shares of Tata Coffee held.

Let me now turn to your specific question. Since you are holding 220 shares of Tata Coffee, you first get 10 shares of TCL for the demerger of plantations business (ratio of 1:22). Now this 220 shares of Tata Coffee will get shares in ratio of 14:55; that means you get 56 shares of TCPL. Since you already got 10 shares for the plantation demerger, you get a total of 66 shares of TCPL overall against your holding of 220 shares. That is ratio of 3:10.

The entire merger will be completed over the next one to one-and-quarter years.

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