ITC gets a taste of Patak’s, may snap it up

HIGH VALUATION MAY COME IN THE WAY OF DEAL

ITC Foods is likely to put in a formal bid for Patak’s, Britain’s popular pickles and Indian curries brand. Heinz could also look into it as it already has a partnership with Patak’s, said sources. The £200 million price tag, however, could be a sticking point as it is being seen as a tad on the higher side for potential partners or buyers. According to information with ET, the tobacco major has been approached by Patak’s investment banker, N M Rothschild with a proposal. “A decision will be taken once the company has studied the details,” said persons close to ITC. When contacted, Ravi Naware, CEO, ITC Foods, declined to comment. From Patak’s point of view, ITC is being seen as “exactly the type of company that could be interested in talking to them,” said persons close to the family. One caveat, though, is that Patak’s owner family — Kirit and Meena Pathak — are looking for a strategic partner to grow Patak’s global ambitions, and are “more likely to be interested in a company with a global distribution network, rather than one with only a presence in India”, an observer close to the family told ET. The Pathaks are personally “1,000% wedded to the company” and would be looking at options to continue their involvement with the 50-year-old brand, say insiders. Patak’s makes a good fit with ITC Food’s current portfolio and its intent to become a total food company. If the deal materialises, ITC could do a lot of things with the brand, both in the domestic and in the global markets. Patak’s claims to be the best-recalled brand in its category, and its mission is to become the world’s leading supplier of authentic Indian food. Patak’s on its kitchen shelf will give ITC Foods a global footprint, and could also open doors for its existing premium brands such as Kitchens of India, in the overseas markets. Patak’s has a footprint in 40 countries, and is active in markets like the US, Australia and Canada, besides the home market of the UK. Before that, though, industry circles say the valuation may need to be scaled down. Valuing Patak’s at a revenue multiple of three — the company’s current revenue is £66 million — may be too high for serious players to move ahead, say experts in food industry. The exact contours of a deal are still hazy, as the Pathak family has appointed Rothschild to explore all options. While not ruling out an outright sale, it is likely that the Pathak family would prefer a deal which allows them to remain actively involved.

Patak’s fits ITC’s global ambitions

ITC Foods may bid formally for Patak’s, the iconic pickles and Indian curries brand of Britain. “The company has appointed Rothschild to explore a number of routes, which could include a equity participation, forming of a joint venture, or a sale. Till now, Patak’s has grown through retained profits, but now it needs more to achieve its global ambitions,” said Patak’s spokesperson. ITC, with its deep pockets could be a strong contender if the two could arrive at the right price. ITC has demonstrated a great deal of seriousness in its food business during the past few years. The company just launched its snack food brand, Bingo, and is believed to be exploring several options to enter new products category in food and beverages segment. It is already present in ready-to-eat foods, confectionery, biscuits and staples. Patak’s, on its side, enjoys an iconic status in UK’s curry circles, and its recent campaign with the tagline ‘Patak’s Cures your Curry Cravings’ has generated quite a bit of spontaneous recall in the UK. Patak’s already has partnerships with Unilever and Heinz, and it is likely that either of the two partners could develop the relationship into something stronger. “As yet, there are no new developments on this front,” said people familiar with the situation. Patak’s expects to grow net sales by 7% in the current financial year ending September 30, 2007 to £71 million, and gross margins to £31 million (£27 million in 2006). If an Indian company does manage to buy Patak’s, it will not be India’s first FMCG acquisition overseas. The first time any Indian company made headlines was some years ago when Tata Tea acquired Tetley of the UK and followed it up with a series of beverage acquisitions, the US energy drink Glaceau being the last one. Given its appetite for overseas acquisitions, one wild-card theory doing the rounds is that the Tatas might even have Patak’s fall into their laps.

Courtesy: EconomicTimes

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