Tata Tea Ltd and the European Bank for Reconstruction and Development (EBRD) will jointly acquire a controlling stake in the Russian branding, packaging and distribution company `Grand', a well known player in Russia's coffee and tea sector.

The consortium led by Tata Tea, acting through an overseas subsidiary, intends initially to hold 51 per cent of the Grand business -- with Tata Tea and EBRD having an effective stake of 33.2 per cent and 17.8 per cent, respectively. The balance of 49 per cent will remain with the founding promoters, led by Russian investor Alexander E Borisov.

Set up in 1994, Grand today is a major Russian branding, packaging and distribution company in the economy segment of the coffee and tea business in Russia. It is mainly focuses on regions outside the big cities and areas like the Urals, Siberia and Southern Russia.

The investment by the EBRD and Tata Tea will be used to fund a programme which includes, among others, the modernisation of Grand's production facilities in order to increase quantity and quality of output. This will open the way for new market opportunities, EBRD said in a release.

Besides providing fresh capital, Tata Tea will also bring its considerable expertise and know-how to Grand.

Tata Tea, one of the largest producers of coffee and tea in the world, has no investments in the beverages sector in Russia so far, but sees strong growth potential on a market where coffee is becoming increasingly popular and tea is a national beverage, the release said.

''The EBRD is pleased to add its specific strengths to Tata's in order to make this investment successful. We can see a very clear role for Tata on the Russian market where it will provide customers with a wider choice of tea and coffee products of the highest standards,'' Gilles Mettetal, EBRD director for agribusiness, said.

The acquisition is subject to the fulfillment of various conditions, including regulatory approvals and is expected to be completed during the first half of 2009.

In the agribusiness sector alone, the EBRD has directly committed more than €5.0 billion in over 330 projects across Central and Eastern Europe and the Commonwealth of Independent States since 1991.