Tata seeking partner to buy out Mistry family stake: report

28 Oct 2016


Ratan Tata, who returned this week to the helm of India's largest conglomerate, is seeking a partner that could buy out the Tata Sons stake held by the family of ousted chairman Cyrus Mistry, according to a Bloomberg News report, citing people with knowledge of the matter.

The Shapoorji Pallonji Group has an 18.4-per cent stake in Tata Sons, the holding company for the Tata Group, in which Tata Trusts hold a 66-per cent stake.

The move comes at a time of tension between the two business groups after the ouster of Cyrus Mistry, son of Shapoorji Pallonji Mistry, as chairman of Tata Sons earlier this week in a boardroom coup (See: Cyrus Mistry stands down as Tata Group chairman, Ratan Tata takes over). The report further says that the Tata Group has begun talks with sovereign wealth funds and other long-term investors to explore possibility of tie-ups for a buyout. The talks are part of the Tata group's efforts to prepare for "various scenarios", said the report.

Bloomberg quotes Paras Bothra, vice president of equity research, Ashika Stock Broking, as saying, ''It's not going to happen so easily as Mistry may not give in without a fight.'' Bothra nonetheless says that if such a deal can be worked out, it would be a good move as that will end the uncertainty surrounding the group.

The Tata trusts, which currently own about 66 per cent of Tata Sons, have also been drafting plans for how to raise funds if they were to make an offer for the Mistry family stake themselves, one of Bloomberg's sources said. The plans could involve the Tata trusts paring holdings in various operating companies to be able to afford the purchase, according to the person.

Mistry is still considering his next steps and plans to make a decision on his response to the ouster in the next couple of weeks, another person said.

A spokesman for Tata Sons declined to comment and a representative for the Mistry family's holding company, Shapoorji Pallonji Group, declined to comment.

However, this move by the Tatas to reach out to sovereign wealth funds is based on the assumption that Mistry and the Shapoorji Pallonji family would want to sell their stake in the Group, says Seema Mahajan, director, Centre of Family Business and Entrepreneurship, Narsee Monjee Institute of Management Studies (NMIMS).

The holding company is examining at least two internal candidates to succeed Mistry, people familiar with the matter said. Tata Consultancy Services Chief Executive Officer N Chandrasekaran and Jaguar Land Rover head Ralf Speth are among those being considered, the people said, asking not to be identified because the process is private. Trent Ltd Chairman Noel Tata, a member of the founding family and Mistry's brother-in-law, is also being considered.

With no credible reason give out yet by the Tata Group for the ouster of Cyrus Mistry as the chairman, the handling of the Mistry issue is ''unprofessional'' and ''not in keeping with the standards'' everyone expects from the Tata Group, said Mahajan. She said that when the Tata Trust decided to appoint Mistry as the chairman, they had to allow for new ideas and new approaches to business and not expect the old tried-and-tested methods to continue under a new head.

"What is the difference between a family-owned business and Tata Sons? By wanting someone at the helm to continue what the business decisions of Ratan Tata, in spite of the Nano being a failed venture, for instance, the Tata Sons board want the Group to be run like a family-owned business.This decision by the board and Ratan Tata just goes to show that they are not receptive to changes," said Mahajan.

It is only on his removal that allegations and misrepresentation of facts are being made about business decisions that the former chairman was party to for over a decade in different capacities,'' Tata Sons said in the statement on Thursday. ''The tenure of the former chairman was marked by repeated departures from the culture and ethos of the group.''

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