American food company Mars Inc, best known for its confectionery and pet food business, has offered to buy the shares held by public shareholders in Tasty Bite Eatables Ltd, which mainly exports its ready-to-heat food products.
Two days after Mars Inc signed a definitive agreement to indirectly acquire majority stake in Tasty Bite, it has made an open offer to buy out the remaining 25.77% stake for up to Rs 352 crore ($54.7 million), as per a stock market disclosure.
The open offer has been made at Rs 5,323.87 a share, valuing the company a tenth lower than its current market price. Tasty Bite shares that have doubled in value in the last one year were trading at Rs 5,830 each at 2pm on the BSE in a strong Mumbai market on Wednesday.
The share price had spiked last week indicating that the punters had a whiff of an impending deal. However, the share price moderated towards the end of the week only to shoot up as the deal was made public on Monday.
Tasty Bite’s American parent Preferred Brands International (PBI) owns 74.23% stake in the firm. Mars has inked a deal to buy PBI for Rs 1,109 crore ($172.8 million), the company has said in the fresh disclosure.
Mars had said on Monday that it expects that Tasty Bite will continue to be listed in India. This implies it does not expect its open offer to succeed.
Public companies need to maintain at least 25% public holding as per listing norms.
An email query sent to Mars Inc regarding this didn’t elicit any response till the time of filing this report.
In 2015, Kagome had acquired 70% stake in PBI, thereby gaining indirect majority stake in the firm. The remaining 30% stake was held by US-based consulting and venture advisory firm ASG-Omni, which had got control of Tasty Bite over 17 years ago.
ASG-Omni is led by former Pepsi and Unilever executives Ashok Vasudevan, Sohel Shikari and others, some of whom were involved in marketing Tasty Bite products in the US.
Mars is buying 100% stake in PBI which means both Kagome and ASG-Omni are cashing out. Kagome, in particular, will make a neat pile since Tasty Bite’s valuation has risen over seven times after it acquired control two years ago. Kagome’s open offer then had failed to garner any significant shares of Tasty Bite.
Tasty Bite’s portfolio includes a wide range of vegetarian offerings, including Indian/Asian entrees, spice and simmer meal kits, and organic rice and lentils. While the majority of sales are generated in North America, PBI also manufactures products that are sold through retailers in the UK and Australia and through food services in India.
It manufactures products at its Pune facility and exports majority of its products to the US. PBI also enjoys a significant food service business under which it supplies to other food manufacturers and quick-service restaurants in India. The bulk of its products is sold under the Tasty Bite brand.
Tasty Bite’s revenues rose 21% to Rs 252 crore, with its net profit rising 41% to Rs 22.76 crore for the year ended March 2017. The firm is currently trading at almost six times its annual revenues.
Mars Food has a broad portfolio of brands including ready-to-eat and dry rice and grains, sauces, meal kits, meal helpers, and spices under the brands Uncle Ben’s, Masterfoods, Dolmio, Seeds Of Change, and others.
Globally, Mars Inc has brands like Snickers, M&M’s, and Wrigley’s besides pet food label Pedigree. Many of these products are sold in India and Mars has direct presence in the country through its Wrigley confectionery business unit.
Several investors have backed companies focused on ready-to-cook meals in the recent past. In October 2016, Ready-to-cook packaged food company iD Fresh Food (India) Pvt. Ltd was in the last leg of its Series B round of funding to drive its expansion plans in India and abroad.
In the same month, specialty food ingredients maker Veeba Food Services Pvt. Ltd raised $6 million (around Rs 40 crore) in its Series B funding round led by its existing investor Saama Capital and new investor Verlinvest, a private Belgian family investment company.
Prior to that, in August 2016, Mumbai-based packaged food startup Yumlane raised nearly Rs 6.6 crore in a seed round of funding led by Flipkart co-founder and CEO Binny Bansal.
In May 2016, Bengaluru-based packaged foods company Maiyas Beverages and Foods Pvt. Ltd raised Rs 200 crore ($30 million) from investors led by private equity firm Peepul Capital. In the same month, Chennai's Mambalam Iyers Food Products Pvt. Ltd raised between Rs 20 crore and Rs 33 crore ($3-5 million) in its Series A round of funding.