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Global M&A trend. Where do you see it headed this year? The writting's on the wall.

Graph courtesy DealBook

Sub-Prime Benefits Indian MidCap Companies

This Business Line article reports that Indian Midcap companies have a hit a good time in their Deal Intentions in the US. Reduced profitability, crunch for working capital requirement (this requires a second look though..) & distressed assets on the block are all adding up to increased acquisitions.

This cross sector trend has seen Bangalore-based Kavveri Telecom Products and Pradot Technologies Pvt Ltd, the Ahmedabad-based Azure Styx Infotech, the Hyderabad-based FXLabs Studios, the Indore-based Plethico Pharmaceuticals, the Aluva-based Kerala Ayurveda Ltd and the Vadodara-based Minal Jewels figure among the mid-cap firms that have bought out US companies post-November 2007.

According to Virtus Global Partners’ estimates, deal sizes of less than $25 million accounted for 76 per cent of the US-bound acquisitions by volume in 2007, followed by transactions in the $25 million-50 million range ( eight per cent). “Deal sizes in the $50 m-100 m, $100 m-500 m, and greater $500 m range each accounted for less than six per cent of the 2007 transactions,” an analyst said.

For a list of deals below $25 Mn. read the complete article on Business Line

M&A Activity 2007

Here's a merged graphic on last years Banker Activity. It sure has been a busy year.

CLICK TO ENLARGE. For more detailed reference click Business Line

Its raining M&A's

The volume of overseas mergers and acquisitions (M&As) by India Inc has grown phenomenally in the first half of the current fiscal and is likely to reach further heights over the next one year.
In the fiscal year 2006, the outbound M&As from India had an aggregate value of $13.97 billion spread over 480 deals. However, the M&As in the first half of the current fiscal surpassed this figure and stood at $25.58 billion, according to the data available with KPMG.

“The average ticket size of these outbound M&A deals from India had also been growing from $25 million in 2005 to $39 million in 2006,” Mr Preet Mohan Singh, Director (Corporate Finance), KPMG India Pvt Ltd

The key drivers behind this growth are increasing global consolidation, cost of production and valuation arbitrage, customs/skill set acquisition.

Source: Business Line

400 PE, M&A deals under CBDT scanner

The spill-over effect of Vodafone’s battle with Indian tax authorities may prove costly for several other deal makers. The Central Board of Direct Taxes (CBDT) has reopened about 400 cases of big and mid-sized transactions that took place during the past six to seven years.

According to sources close to the development, the cases include foreign corporates and PE firms selling stakes of companies based in India, and not paying any capital gains tax. One of the first such cases that the tax department is currently probing is Montreal-based Alcan Inc’s selling of the controlling stake in Indian Aluminium Company (Indal) to Hindalco Industries seven years ago, sources in the finance ministry told SundayET.

Significantly, there were around 300 PE deals clocked in India in 2006 alone. The tax department had earlier slapped a notice on Vodafone Essar, demanding $2 billion as capital gains tax over its $1-billion acquisition of a majority stake in Hutchison Essar, India’s fourth largest mobile telephone company. The case is now locked in the Bombay High Court.

Source: Economic Times

Jain Irrigation to acquire an Israeli co.

The Indian agriculture conglomerate Jain Irrigation Systems is buying 50% of Israel's Na'an Dan Irrigation at a company valuation of NIS 140 million.

Sources in Israel's agriculture sector say that Na'an Dan preferred the Indian offer, even though Israeli company Netafim's offer was more attractive in many respects. The reason for rejection is believed to be that Netafim demanded a controlling share in the company, raising concerns that Netafim would take steps to integrate the management activities of the two companies, sending Na'an Dan's management home.

Source: Haaretz.com
Related News: Jain Irrigation to acquire US-based Aquarius Brands for $21.5 mn

HDFC buys out Chubb in insurance JV

HDFC bought out the 26% stake of Chinese insurance major in the JV whose book value expected to be around Rs100 crores would make the deal worth Rs 26 crore.The General Insurance Venture was set up in 2001.

The Insurance Regulatory and Development Authority(IRDA) has been approached by HDFC to clear the Buy-Out.Ergo,the German reinsurance company is speculated to be the lead runner in the race to pick up the Chubb stake,till then,as the HDFC authorities say the JV will be fully owned by them.

Indian insurance regulations limits foreign institutions to own a maximum of 26% stake in insurance ventures.The limit might be raised to 49% but not without political opposition.

Source: Mint

Hindalco wins court approaval for Novelis buyout

The AV Birla group promoted Hindalco is set to become the largest producer of aluminium rolled products in the world after it won the approval of the Ontario superior court to acquire Novelis, a leader in the aluminium rolled products market.The buyout is valued at $6 bn.

The Atlanta based Novelis will now become a fully owned subsidiary of Hindalco.This catapults Hindalco in the top five league of aluminium heavyweights with revenues standing at $14 bn.

Hindalco would acquire Novelis through its subsidiary AV Metals which would cost the company $44.93 per share.Novelis is on its way to being delisted from the New York Stock Exchange and the Toronto Stock Exchange.

Source: The Economic Times

Ranbaxy acquires yet another company,this time a South African major

Ranbaxy laboratories has added another feather to its cap.It confirmed the acquisition of Be-Tabs the South African pharma major for a whooping $70 million.This will make the company the fifth largest generic pharmaceutical company in South Africa.

The deal is expected to give Ranbaxy local manufacturing capability.As part of this acquisition, Ranbaxy has concluded a Black Empowerment transaction with a Community Investment Holding(CIH) group company.Ranbaxy has also planned a major upgrade of the Be-Tabs manufacturing facility to bring its factories in resonance with new standards.The comapny expects to cash in on the brand equity of the South african firm and expects to appease the local markets.

This would lead to the further enhancement of the products portfolio of Ranbaxy especially in the acute and over the counter products stream.Ranbaxy has operations in South Africa since 1996.

Source:
www.moneycontrol.com

United Spirits buys scottish counterpart Whyte and Mackay

Vijay Mallya's United Spirits has bought out the Scottish Scotch major Whyte and Mackay.An official announcement is scheduled for Wednesday.The deal which was initially valued at Pound 650 million was settled at pound 595 million which includes a pound 100 million payout to bridge a Pension fund Deficit in W&M's Pension trust.

The main owners of the Scottish firm is expected to leave the board including chief executive Mr.Vivian Imerman,who owns nearly two thirds of the firm.However,United spirits is keen on Mr Brannan ,the erstwile manager to head the existing management,as scotch is a new proposition for the Indian major.

Whyte and Mackay has an array of brands including their USP W&M scotch whisky,Dalmore scotch whisky,Isle jura single malt and Vladivar vodka.United spirits will look to promote these in India and some other markets too.

Mr Alok Gupta, one of Vijay Mallya's senior executives is expected to control the operations going forward.

Source: The Economic times

Godrej Sara Lee may take over Sara Lee business in India

Godrej Sara Lee, the joint venture company between the Godrej Group and US-based Sara Lee Corporation, is in discussions to take over Sara Lee’s independent business unit in India. While Sara Lee has a 51 per cent stake in Godrej Sara Lee (GSL), a household product company, it also has an independent unit, Sara Lee Household and Body Care India, which is headquartered in Chennai. The independent unit markets brands like Kiwi shoe polish, drain cleaner Kiwi Dranex and hair care brand Brylcreem in India. It is believed that the business and operations of Sara Lee Household and Body Care will be transferred to GSL. Sources familiar with the discussions said the size of the transaction is estimated to be in the range of Rs 100 crore. At present, Godrej Sara Lee’s portfolio largely consists of household insecticide brands like Hit and Good Knight in India, apart from Sara Lee’s air purifier brand, Ambi Pur. Industry sources said Sara Lee was keen on moving all its brands to one company to better manage its portfolio in India.

Wockhardt will pay $265 million (Rs 1,090 crore) in cash to acquire Negma Laboratories

Wockhardt will pay $265 million (Rs 1,090 crore) in cash to acquire a research-based French pharmaceutical company,Negma Laboratories. This means a valuation of 1.8 times the sales and 9.7 times the EBIDTA. While the valuation seems reasonable, if measured against revenues, it is relatively high when one looks at the EBIDTA multiple. Wockhardt will fund the acquisition through internal accruals and debt; it has about $250 million on its books as cash. But more importantly, the acquisition gives Wockhardt a portfolio of patented products.
The management expects the takeover to reflect in its performance from the third quarter. Indian pharma companies are vying for a global presence in the branded generic drug space. Dr Reddy’s had recently acquired German generic drug maker Betapharm.
Earlier, Wockhardt acquired companies in the UK (Wallis and CP Pharmaceuticals), Germany (Esparma) and Ireland (Pinewood Labs). With this acquisition in France, the company effectively covers the whole of Europe. This acquisition helps the company get a strong foothold in the French generic market, which is valued at about $2 billion.
With this acquisition, the management has raised its estimate of group turnover by $90 million to $590 million for FY07. The European business will account for more than 60% of total revenues. The key concern, however, could be the acquisition’s impact on margins. Margins could get hit by about 100 basis points during the current year, as Negma recorded an EBIDTA margin of about 18% last year.

Ranbaxy considers acquisitions in US

Ranbaxy Laboratories Ltd, India's biggest drugmaker, considers acquisitions aimed at expanding operations in the US, south and central America and its home market to be priorities.
Ranbaxy made eight acquisitions last year, buying South African company Be-Tabs Pharmaceuticals and Romania's Terapia. The US $3.4 billion company has been built over the past three decades by copying blockbuster drugs such as Bayer AG's Cipro and selling them for a fraction of the price in countries including France, Germany and the US.

Zydus acquires Tokyo-based Nippon Universal

Cadila Healthcare today announced the acquisition of 100% stake in Tokyo-based Nippon Universal Pharmaceutical.

According to a release issued by Zydus to the BSE today, Nippon reaches out to more than 4,000 hospitals and clinics, and is expected to provide a fillip to the group's operations in a market that is highly complex and dominated by local pharma Companies.

Pankaj R Patel, chairman and managing director, Zydus, said: "We had announced our intentions of being a long-term player in this market when we set up our subsidiary last year. Going forward, I believe this acquisition will unlock value for us as the generic market in Japan is just opening up, and post-2010 we expect this market to be a major growth driver for our global business."

Read the article in Business Standard.

SRIT to acquire Agilent Technologies arm OSI

Sobha Renaissance Information Technology (SRIT), a Bangalore-based software company, is acquiring Objective System Integrators (OSI), a division of the $5 bn-test and measurement company Agilent Technologies, for an undisclosed amount. OSI will provide SRIT a strong foothold in the telecom management solutions space. The acquisition will be funded by SRIT through a combination of debt and internal accruals.

OSI provides software solutions for the integration and management of communications networks and is a major player in the operations support systems in the telecom sector. OSI was acquired by Agilent for $665 mn in 2000 when its revenues were pegged at around $70 mn. As of now, revenues of OSI are around $26-30 mn. It has around 120 people with presence in India and the US. This is SRIT’s second acquisition. Earlier, it had bought Billing Components, a German telecom software company.

SRIT focuses on three verticals, namely, healthcare, telecom and enterprises and currently has around 1500 people spread across 11 countries. It has registered revenues of around Rs. 200 crores for the FY07 and is targeting around Rs. 450 crores in FY08 with Rs. 280 crores coming in the telecom vertical. Currently, it gets 30% of its revenues from healthcare and telecom segment with the remaining from enterprises.

Read The Economic Times article.

Jet Airways to buy Air Sahara for around Rs. 1450 crores

Jet Airways has agreed to buy out Air Sahara for around Rs. 1450 crores, lower than what it had agreed to pay (Rs. 2300 crores) in January 2006 when the two had signed a contract that got into trouble and litigation.

Both the airlines have seemed to have reached an agreement on the commercial aspects of the deal, which will be submitted to the arbitration panel on 12th April at 5.30 pm, after two days of hectic negotiations. The offer includes Rs. 500 crores that Jet had paid Air Sahara last year. However, it is unclear whether the deal includes the Rs. 300-350 crore-debt on the books of the latter. The offer will not include Rs. 180 crores that Jet had already paid in April 2006 for the normal business operations of Air Sahara.

Jet Airways, in January last year, had signed a share-purchase agreement to acquire 100% equity of Air Sahara. As part of the deal, Jet paid Rs. 180 crores for Air Sahara’s revival and Rs. 500 crores for Air Sahara shares besides depositing Rs. 1500 crores in an escrow account opened for the purpose. However, the deal got into trouble after Jet cited lack of government clearance as the reason to walk out of the deal. The matter then went to court that ordered for the arbitration.

Read more in The Economic Times.

Rajan Raheja-promoted Hathway Investments buys 39% in ING Vysya Mutual Fund

The Economic Times reports that Hathway Investments, a company promoted by realtor Rajan Raheja, has bought out ING Vysya Bank’s entire 39% stake in ING Vysya Mutual Fund for an undisclosed sum. Post this deal, ING will hold 42.5% in the fund, Hathway 39%, and existing Indian shareholder Kirti Equities, will retain 18.5%. The fund would be renamed as ING Mutual Fund. The asset management company’s total assets under management as on March 31, 2007, were close to Rs. 3630 crores. For the year ended March 2006, the AMC had reported a net loss of Rs. 21 crores. This could have depressed the valuation of the fund house, which usually ranges from 4-6% of assets. Hathway, which earlier held a 25% stake in Franklin Templeton, is estimated to have pocketed around Rs. 300 crores from the sale of its stake, less than six months ago.

Bharati Shipyard buys out UK-based shipyard company Swan Hunter

India’s second-largest private sector shipbuilder Bharati Shipyard is acquiring UK-based Swan Hunter Shipyard for an undisclosed amount. The entire machinery and equipment from Swan Hunter will be dismantled and brought to India over six months to be re-built at Bharati’s shipyards. The acquisition might be one of the biggest deals till date in the domestic shipbuilding industry. A comparable new shipyard would have cost Rs. 200-250 crores.

Swan Hunter is a 130-year old shipyard engaged in shipbuilding, ship conversion and construction of offshore structures. It has built over 1600 ships of various types, including more than 400 naval vessels, which includes two aircraft carriers. Swan Hunter has the capacity to build vessels of up to 100,000 dead weight tonnes (DWT).

Through this acquisition, Bharati Shipyard is expected to have fully automated panel line, quayside traveling gantry cranes of up to 180-tonne capacity, 30 overhead traveling cranes of up to 60-tonne capacity, plate rolls, bending presses, robotic profiling machines, and digitally fed plasma burning equipment. This will enable Bharati to build ships and vessels with the capacity of up to 60,000 DWT. Bharati will also acquire the 20,000-ton lift capacity floating dock of Swan Hunter, which will add a lot of value to its existing operation.

Read more in the Business Standard article.

Mumbai-based machine engineering firm makes Canadian acquisition

Mumbai-based machine tool and engineering company Batliboi Limited has acquired Canadian firm Quickmill, Inc. for an estimated Rs. 22 crores.

This is Batliboi’s first acquisition, the logic behind it being leveraging on Quickmill’s distribution network and research and development capabilities. The acquisition will help Batliboi to establish its presence in North-America where Quickmill enjoys around 75% market share in the heat exchanger segment. The company plans to use Quickmill's distribution network in North America, and utilize its strong R&D capabilities and in turn, conduct detailed engineering for Quickmill's machinery equipment, heat exchangers, aerospace dies and moulds, bridge-building machinery and other Quickmill products in India.

Batliboi primarily manufactures machine tools, specialized machines, textile air engineering machines and air conditioners at its Surat and Bangalore facilities. The company's clients include textile manufacturers, automobile manufacturers and power equipment makers, besides hotels which use its air conditioners and refrigerators.

Read the article in The Economic Times.

Suzlon acquires 7.7% of REpower; raises bid to €150 per share

Indian wind power major Suzlon Energy has revised its offer price for REpower Systems of Germany to €150 per share, with an acquisition of 7.7% stake in the German firm. Suzlon has purchased 627,000 shares of REpower Systems through it two step-down, wholly-owned subsidiaries, SE Drive Technik GmbH and Suzlon Windenergie GmbH. With this acquisition, the company has revised the offer price of the voluntary public tender offer to €150 from the €126 for acquiring up to 100% share of REpower. Suzlon has teamed up with Martifer, a unit of Portugal's largest builder, Mota-Engil, to launch a bid for REpower. Martifer owns more than 25% of REpower.

Earlier in March, French nuclear power firm Areva offered €140 per share for REpower, raising its previous offer of €105 by a third, to top Suzlon's bid of €126 per share.

Read The Economic Times article.
Related Posts:
Suzlon Energy bids $1.3 bn for German company REpower
Areva ups bid price for REpower to €140 / share; Suzlon mulling counter-bidding options