Orkla has entered into an agreement to acquire 67.8 per cent of the shares in Eastern Condiments. With this move, Orkla will double its sales in India.
The Norway- based Orkla already holds a strong position in the Indian branded food market with the well-known MTR brand which has grown its sales five-fold since it was acquired by Orkla in 2007. For the last 12 months ending 30 June 2020, MTR had a turnover of Rs 9.2 billion (approx. NOK 1.1 billion). With the transaction announced on Friday, Orkla will grow its position as one of the leading branded food players in India and have a platform for further growth in the spice category and in adjacent categories
Orkla, through its wholly owned subsidiary MTR Foods Private Limited (“MTR”), has signed agreements to purchase a 41.8 per cent ownership stake in Eastern from members of the Meeran family and to acquire the entire ownership stake held by McCormick Ingredients SE Asia PTE , which will give Orkla a 67.8 per cent ownership stake after completion of the transactions. Eastern is currently owned by the Meeran family (74 per cent) and McCormick (26 per cent).
Following completion of these transactions, a merger application will be filed with the intention of merging Eastern into Orkla’s wholly owned subsidiary MTR. The merged company will be jointly owned by Orkla and the two brothers Firoz and Navas Meeran, with an ownership stake of 90.01 per cent and 9.99 per cent respectively.
The merger will result in the union of two iconic Indian brands. The merged business will create a solid base for future growth in the Indian branded food market, driven by the positions of Eastern and MTR in spices and packaged food categories. With this transaction Orkla will establish a platform for further growth in India in several categories.
The parties have agreed on a purchase price that values Eastern 100 per cent at Rs 20 billion or approx. NOK 2.4 billion on a debt and cash free basis. The acquirer is Orkla’s wholly owned subsidiary MTR Foods.
“This announcement marks a significant step for Orkla towards delivering on its strategy to strengthen our footprint in our core geographies. By joining forces, Eastern and MTR will create a solid platform in the fast-growing Indian market, based on strong local brands. MTR has been a great success story for Orkla. Now we look forward to continuing the journey with the Meeran brothers as partners”, said Orkla president & CEO Jaan Ivar Semlitsch.
“We are entering into this partnership at a special point in time for Orkla and for the rest of society. During the ongoing coronavirus crisis, our priorities have naturally revolved around taking care of our employees, preventing the spread of infection and supplying the food, cleaning products and hygiene articles that people need. At the same time, we have also been committed to positioning Orkla for the longer term. I have strong confidence in the long-term strength and resilience of the Eastern and MTR brands. Spices are an essential part of any Indian household, and I even believe we will emerge strengthened from this crisis,” added Semlitsch.
“Eastern and MTR have a strong combined portfolio of complementary products, an attractive geographical presence and good export potential. The Indian branded food and spice markets are growing by double digits, and we see positive long-term demand dynamics with increasing purchasing power and more urban lifestyles. We are looking forward to this new partnership. This will definitely strengthen Orkla’s position in India,” said Sanjay Sharma, CEO, MTR.
“Orkla is known for its strong, local brands and holds leadership positions across multiple FMCG categories in several markets. Orkla has a solid track record of building leading food brands based on a strong organisational culture and company values. Together with MTR, and as part of Orkla, we will have a stronger platform for our successful operations,” says Navas Meeran, chairman of Eastern.
Eastern offers a mix of non-vegetarian and vegetarian food products largely in the categories of blended and single spices. MTR has, and will continue to have, a purely vegetarian product range in spices and packaged foods. Together, the companies will have an even stronger offering to the Indian consumer.
The Kerala-based Eastern has seven production facilities in four different states in India and employs around 2,955 people. Its headquarters are located in Edapally, Kochi.
Eastern was established in 1983 by M. E. Meeran. For the last 12 months ending 30 June 2020, the company had a turnover of INR 9.0 billion (approx. NOK 1.1 billion), and normalised EBITDA of Rs 1.1 billion (approx. NOK 129 million). The company’s turnover has grown by close to 8 per cent annually in the period 2014-2020 (CAGR, financial years to end March). About half of the company’s turnover is generated in Kerala, with the remaining revenue stemming equally from across India and exports.
MTR was established in 1924 and has been a part of Orkla since 2007.