There isn?t a Kraft Foods that?s making a $16.7-billion hostile bid for British confectioner Cadbury plc. Or a couple of chocolate makers like Hershey Co and Nestle SA turning white knights. Neither is the likes of a Reckitt Benckiser wanting to merge with another consumer giant Colgate Palmolive. But of late, there has been some action in the Indian M&A (mergers and acquisition) space. In a deal that could match Tata Steel?s $13-billion acquisition of Anglo-Dutch steelmaker Corus in 2007, Reliance Industries has made a pitch for Lyondell Basell and may pay up to $12 billion for the bankrupt petrochemicals firm?s assets. In another overseas acquisition, Essar Oil is looking to buy out three refineries of Shell Plc in exchange for a 10% stake, valued at close to $700 million.
But both deals may now happen only in 2010. Indeed after a dull 2009, when the total value of M&A deals just crossed the $10 billion mark, way below the value of $38 billion seen in 2007, 2010 could see many more deals. Infosys is on the prowl for what could be a $300 -400 million target while Vedanta after not having been able to gain control of Asarco, could scout elsewhere for copper assets. Despite stocks having been battered in the earlier part of the year, Harish HV, partner, Grant Thornton points out that there weren?t too many hostile takeovers. Also, as Jayesh Desai, head, Transaction Advisory Services, Ernst & Young, observes many firms that shopped for acquisitions in 2007 and 2008 were busy raising money to fund them or trying to restructure the operations of their newly-acquired businesses.
It?s also true that some big deals, including the Bharti Airtel-MTN deal fell through. The other big miss of the year was Sterlite?s bid for the copper mining assets of Asarco. The deals that made it were Essar Telecom?s buyout of telecom businesses in Uganda and Congo from the Dhabi Group for $320 million. There were some big inbound takeovers; while Sodexo SA bought a controlling interest in Radhakrishna Hospitality in an $89-million deal, Sanofi Pasteur bought an 80% stake in Shanta Biotechnics for $665 million.
Sujay Shetty, associate director, Pharma and Life Sciences Advisory, Pricewaterhouse Coopers, says that while earlier global pharma majors were using Indian companies to outsource either research or manufacturing, their focus has now shifted to the Indian market because it is going to be among the top ten markets by 2015.
In other alliances, Nomura Asset Management teamed up with LIC Mutual while T Rowe Price forked out $140 million for a 26% stake in UTI. In the home market, Fortis Healthcare acquired ten hospitals of Wockhardt Hospitals in a reasonably priced transaction while Sesa Goa bought out the mining assets of Dempo.
The year was dominated by some in-house transactions including the merger of the cement assets of Grasim with group company UltraTech.
The idea is to gain from economies of scale since the merger would create India?s cement company with a capacity of close to 50 million tonne. Rallis became a subsidiary of Tata Chemicals with the objective of exploiting synergies.
