TRIGGER LIMIT MAY GO UP TO 25%

100% open offer norm unlikely

Economic Times: 21/10/2010

Opposition Due To Advantage Of Overseas Buyers Over Indian Cos

Reena Zachariah MUMBAI THE Securities and Exchange Board of India,or Sebi, is set to unveil new rules on takeover of public listed firms based on the recommendations of a committee headed by C Achuthan,but may stop short of implementing a key proposal that envisages a mandatory open offer for 100% of the equity of a company by an acquirer.

The Sebi board,which is scheduled to meet on Monday,will discuss the overhaul of the takeover rules,notably an increase in the limit for triggering open offers to 25% from 15% and doing away with the concept of a non-compete fee to promoters.However,considering the resistance from industry bodies or lobbying arms of corporates,merchant bankers,corporate lawyers and fund managers,the capital market regulator may have to take a hard look at the proposal that makes it obligatory on all acquirers to buy out 100% of the equity of a target company,according to a senior official in Sebi.

This official said the bulk of the comments that it has received from industry as well as capital market intermediaries,including merchant bankers,related to this proposal.The opposition to this proposal stems from the fact that overseas acquirers have an advantage over their Indian counterparts.Indian corporates cannot access bank funds for buying out a company as RBI does not permit banks to fund such an activity.In contrast,many foreign companies do not face such restrictions and that makes it easier for them to make an aggressive bid for controlling local firms.

The 25% threshold for triggering a tender offer moves us closer to norms in other countries.Requiring the tender offer to be for all 100% appears fair to minority shareholders,but then building in a squeezeout provision would make it fair for acquirers, said Anantharaman,MD & head-corporate advisory & finance,Standard Chartered.

Milestones of Tata Group

The Tata group is one of India's oldest, largest and most respected business conglomerates. The group's businesses are spread over seven business sectors.

Nirma board decides to de-list company

Sun, Oct 10 2010. 4:17 PM IST

With $1 billion revenue, today Nirma is the seventh largest soda-ash maker in the world.

Ahmedabad: The board of directors of Nirma Ltd Sunday approved the proposal made by chairman Karsanbhai Patel and other promoters for acquiring 3.63 cr equity shares of the company, being all the equity shares not held by promoters in the company and seek delisting of equity shares from the Stock Exchanges pursuant to and in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations), 2009, the company said in a corporate announcement.

Presently, Nirma’s equity shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

Incorporated in 1984, Nirma Limited paved way for consolidation of operations leading to listing of the company in 1994. The company’s main line of business is soaps and surfactants. The company recently diversified to pharma and processed minerals and cement businesses.

Total income and gross fixed assets of the company, on consolidated basis, for the financial year ended on 31 March 2010 is Rs4696 crore and Rs5032 crore, respectively. Share capital and reserves of the company as on 31 March 2010, on consolidated basis, is Rs79.57 crore and Rs2746 crore respectively. As on date promoters hold 77.17% of the paid up equity share capital of the company.

“The acquirers believe that it is this changing nature of the business of the company that has led to market valuations of the company to be valued as diversified conglomerate, rather than as a consumer products company or at a valuation that reflects the sum of its parts. The acquirers believe that given the low trading liquidity in the stock, the delisting offer should provide investors with an opportunity to get an exit at a fair value, while according the company the flexibility to carry on its operations,” the company said in a press statement.

The acquirers are of the view that a price of Rs235 per share is an attractive price for the public shareholders of the company under the present circumstances. The price represents a premium of approximately 19% to the price determined as the average of the weekly high and low of the closing prices of the equity shares of the company as quoted on NSE, during the 26 weeks preceding the date of the decision, the company said. The share price of Nirma Ltd stood at Rs224.45 when the markets closed on Friday.

The success story of Karsanbhai who started manufacturing phosphate-free detergent powder in his backyard and sold it while cycling to work has already become business folklore.

With $1 billion revenue, today Nirma is the seventh largest soda-ash maker in the world.

In 2004, the Nirma group expanded into pharmaceuticals by acquiring an IV fluid factory in Ahmedabad. It also acquired US-based Searles Valley Minerals to become one of the top producers of soda ash in the world.

Today, nine manufacturing locations of the company serve four continents globally and 37% of total income is generated overseas.

Fortis Healthcare to buy HongKong business

Fortis Healthcare have agreed to buy the healthcare assets of Hong Kong-based Quality HealthCare Asia for $195 million.

Reuters
Sun, Oct 10 2010. 10:41 PM IST

Mumbai: The controlling shareholders of Indian hospital chain Fortis Healthcare have agreed to buy the healthcare assets of Hong Kong-based Quality HealthCare Asia Ltd for HK$1.52 billion ($195 million), according to statements issued late on Sunday.

New Delhi-based Fortis Healthcare, controlled by billionaire brothers Malvinder and Shivinder Singh, fell short in its bid earlier this year to take control of Singapore-based hospital chain Parkway Holdings as part of an effort to build an international business.

The Quality HealthCare acquisition is being made by the Singhs’ Fortis Global Healthcare Holdings Pte Ltd unit, which it said is the family’s vehicle to build a pan-Asian healthcare business.

In addition to the HK$1.52 billion in cash, Fortis Global Healthcare will provide HK$20 million in base working capital, Quality HealthCare said in a statement.

India pulls top Japanese drug makers

Business-Standard, Mumbai October 4, 2010

Top Japanese drug makers are planning big presence and investments in India, within two years of India’s largest manufacturer, Ranbaxy Laboratories, being taken over by Daiichi Sankyo, the third largest Japanese one.

Mitsui has had a business relationship with Arch for the past four years. The strategic stake sale will help the Rs 1,200-crore Arch to foray into supply of active ingredients and intermediates in the tough Japanese market, as Mitsui will exclusively market Arch’s products in Japan, said Ajit Kamat, chairman and managing director.

“Mitsui has formulation manufacturing units in Japan and contract and clinical research facilities in Singapore. It is natural for them to enter into a strategic alliance in India to access the active ingredient link, which was missing in their pharma supply chain,” he said.

This is the first acquisition by a Japanese company in the Indian drug market since the June 2008 acquisition of Ranbaxy by Daiichi Sankyo. The recent deal is likely to trigger more Indo-Japanese drug sector deals, said Kamat.

Japanese companies such as Takeda, Astellas, Eisai, Taiho Pharmaceutical, Mitsubishi Pharma, Dainippon Sumitomo, Kyowa Hakko and Shionogi are among the top 50 drug companies in the world. The first three are among the world’s top 25 drug companies. Most of these majors were so far concentrating only on the Japanese market, with their patented drugs.

India’s attraction
According to a report by consultancy company PricewaterhouseCoopers (PwC), India is estimated to become one of the top 10 drug markets and will be worth $50 billion in the next 10 years. The country is currently at 14th position in the list of the world’s largest markets, with annual sales of $19 billion.

Takeda, Japan’s largest drug maker, with a history of 230 years and a turnover of ¥1,466 billion (Rs 78,700 crore), is likely to be the next major Japanese drug company to tap the Indian market. “We are considering expanding our business to India,” Oguri Mitso, spokesperson, told Business Standard in an e-mail.

He declined to reveal details. A week earlier, market sources speculated Takeda was in discussions to acquire the formulation business of Dr Reddy’s Laboratories. “Our plans are not related to Dr Reddy’s Labs,” clarified Mitso. A Dr Reddy’s spokesperson also ruled out sale of the domestic formulation business.

Astellas Pharma, the second largest Japanese drug maker, has started testing the Indian waters by launching a liver-kidney-heart transplantation drug in India. Astellas, which is not looking at generics business globally, will launch more products from its parent stable in the coming years, said Himanshu Dave, director, sales and marketing, of Astella’s Indian unit.

“We cannot give a time frame as of now, but we are evaluating the big opportunities in India,” he said. Similarly, Dainippon Sumitomo Pharma, another Japanese drug maker has started an Indian office and will soon launch its operations, said industry executives.

Eisai and Co, another leading Japanese drug leader, is making India a major manufacturing hub for its global operations and is setting up a huge facility at Visakhapatnam, Andhra Pradesh, with an investment of close to Rs 1,900 crore. The facility is ready and is awaiting some regulatory approvals to start production, said industry sources.

These companies will first be confined to small operations to get a feel of the local market. Then, in a year or two, will go for large-scale investments including big-ticket acquisitions, said an industry observer.

Example of Vertical Merger: Backward Integration

Mon, Oct 4 2010. 9:10 PM IST
livemint.com

Tata Motors acquires Italian design house

Both Tata Motors and Trilix Srl have worked together on several projects in the past

New Delhi: Tata Motors Ltd said on Monday that it had acquired an 80% stake in Trilix Srl, an Italian design and engineering firm for €1.85 million (Rs. 11.29 crore). The acquisition is in line with the company’s objective to enhance its styling and design capabilities to global standards, Tata Motors said in a statement. Milan-based LMS Studio Legale acted as legal advisors for the transaction.

Both companies have worked together in the past on several projects. Trilix has developed a strong understanding of the Tata brand and excellent working relationships with the company in several projects over the years, the statement added.

The remaining stake in Trilix is held by its promoters Federico Muzio and Justyn Norek.

With a turnover of €4 million and net profit of €2,50,000, the company offers design and engineering services in the automotive sector.

According to analysts, the acquisition is not a very significant one in terms of the deal size, but it will help Tata Motors enhance its design capabilities. However, since the company is looking forward to some new launches and re-launches, it may be in a positive direction, said Vaishali Jajoo, an analyst with Angel Broking Ltd.

Vijay Mallya in talks to buy majority stake in QPR

05 October 2010 à 13:38

Vijay Mallya is reportedly in talks to buy the London football team Queens Park Rangers.

The club is currently owned by F1 chief executive Bernie Ecclestone and banned former Renault team boss Flavio Briatore.

The Evening Standard newspaper said Mallya, the Indian billionaire and owner and boss of the F1 team Force India, is eying a ‘significant’ stake in QPR, who are currently top of the second division.

ITC & EIH to combine hotel biz, become largest hospitality chain

fe Bureau
Posted: Monday, Oct 04, 2010 at 2352 hrs IST
Updated: Monday, Oct 04, 2010 at 2352 hrs IST

New Delhi: Diversified conglomerate ITC Group and hospitality major EIH have drawn up a blueprint to combine and emerge as the country’s largest hotel chain by revenues. Once the plan fructifies, it would see a three-way venture between the two groups and Reliance Industries (RIL) which recently picked up 14.8% stake in EIH. Currently, the Oberois hold 32% stake in EIH, while ITC holds 14.98%.

According to the plan being worked out, the ITC group would demerge its hotel business, which would then form a partnership with the EIH group. The combined entity would have a much larger revenue base of Rs 1,948 crore, which can then be leveraged for further expansion both domestically as well as overseas. The coming together of the two hotel chains would make them the country’s largest hotel conglomerate in terms of revenues, outstripping the Tata group’s hospitality company Indian Hotels.

Indian Hotels is currently the largest hotel chain in the country in terms of revenues, clocking Rs 1,566 crore for the fiscal 2009-10. Once the merger between the ITC hotel division and EIH takes place, the running of the hotel and its day-to-day management would be in their hands and RIL would not interfere in this aspect.

Sources said talks between the parties are at a preliminary stage, but would gather steam shortly. Analysts said it makes sense for ITC to demerge its hotel business and unlock some value from it. The bulk of ITC’s gross revenue comes from the tobacco business. In the 2009-10 fiscal, cigarette sales of ITC stood at Rs 17,283.03 crore, which is 66% of the company’s total revenue of Rs 26,259 crore.

Sanofi-Aventis launches Genzyme takeover battle

At $69 per share, the offer for Genzyme, based in Cambridge, Massachusetts, is unchanged from a friendly bid that Sanofi-Aventis made privately to management in July.

Paris: France’s Sanofi-Aventis on Monday launched an $18.5 billion hostile takeover offer for Genzyme Corp., stepping up its effort to capture the US biotech company’s promising drugs for high cholesterol and lucrative treatments for rare genetic disorders.

At $69 per share, the offer for Genzyme, based in Cambridge, Massachusetts, is unchanged from a friendly bid that Sanofi-Aventis made privately to management in July and publicly disclosed in August, only to be rejected.

It’s the biggest hostile takeover in the pharmaceutical industry since Roche Holding’s 2008 acquisition of Genentech for $47 billion, according to Dealogic, which analyzes mergers and acquisitions.

Sanofi-Aventis CEO Chris Viehbacher, on a conference call with reporters, said he decided to go straight to shareholders because Genzyme management “refused to engage in constructive discussions” despite several attempts by Sanofi-Aventis.

The offer to Genzyme shareholders opens Monday and runs to 10 December. Viehbacher said he has met with shareholders holding more than 50% of Genzyme’s capital and that he is “confident the offer will be successful.”

Viehbacher said Genzyme shareholders “are frustrated by Genzyme’s unwillingness to engage in constructive discussions with us.”

In an interview on CNBC, Viehbacher said the $69 per share offer “fully values” Genzyme, and suggested that there’s no reason for Sanofi-Aventis to raise it.

“There’s no one else bidding and there’s no new information,” Viehbacher said, “So you can hardly expect us to bid against ourselves.”

In a letter sent Monday to Genzyme CEO Henri Termeer and released by Sanofi-Aventis, Viehbacher said Termeer’s “refusal to engage with us in a constructive manner is denying your shareholders an opportunity to receive a substantial premium, to realize immediate liquidity, and to protect against the risks associated with Genzyme’s business and operations.”

He said Sanofi-Aventis’ offer represented a “significant premium” of 38% over Genzyme’s share price before speculation over a possible deal surfaced in July.

Viehbacher met with Termeer on 20 September but was unable to persuade him of the deal’s merits.

Nathalie Ducoudret, a spokeswoman for Genzyme in France, declined to comment. Genzyme spokespeople in Cambridge couldn’t be reached for comment.

In August, Genzyme said the $69 per share offer undervalued the company and that Genzyme’s board was “not prepared to engage” in negotiations with an “unrealistic” starting price.

Last week Termeer said that a fairer value for Genzyme shares would be closer to $80, its price before the 2008 financial crisis and the company’s subsequent manufacturing problems.

“They have to recognize our value rather than be opportunistic,” Termeer was quoted as saying in the Financial Times.

Genzyme is considered attractive because it has promising drugs for high cholesterol and other disorders in late development, and it already sells some lucrative drugs for rare genetic disorders. That’s a hot niche as big pharmaceutical companies diversify beyond blockbuster pills that get slammed by cheaper generic rivals after several years. The company just received US approval in late May for a new drug for Pompe disease, and its experimental biologic drug for multiple sclerosis is getting expedited review by the Food and Drug Administration.

Genzyme reported a sharp drop in second-quarter profit because of falling sales and charges partly linked to manufacturing problems. Sales of two key drugs -- Cerezyme and Fabrazyme -- plunged because of viral contamination at a Genzyme facility in Allston, Massachusetts, causing the company to halt production and leading to inventory shortfalls.

Genzyme announced in May that it had agreed to pay a $175 million penalty to federal regulators, and is mapping out a plan for overhauling the plant. In the meantime, it has switched production to other plants.
Sanofi-Aventis shares dropped 0.6% at the open in Paris to €48 ($65.88).

Global M&A volume crosses $2 trn landmark

Press Trust of India / New Delhi October 04, 2010, 16:43 IST

The global merger and acquisition volume has crossed the $2 trillion landmark so far this year, with emerging market deals accounting for nearly one third of the total pie, a report says.

According to leading deal tracking firm Dealogic, in the first nine months of this year, global M&A volume totalled $2.03 trillion and the emerging market volume reached $653.2 billion, wherein India's share was $56.7 billion.

"Emerging market M&A accounted for 32 per cent of global M&A volume in the first nine months of 2010, the highest percentage on record," the Dealogic M&A Review said.

Emerging market volume reached $653.2 billion in the first nine months of 2010, and exceeded European M&A for the first time on record, it added.

In India, merger and acquisition volume reached a first nine month record of $56.7 billion so far this year. Inbound deals contributed significantly, with the volume totalling $24.8 billion.

During the first nine months of 2010 cross border volume reached $764.5 billion through 7,352 deals, up 67 per cent from $456.8 billion via 6,036 deals in the first nine months of 2009.

Emerging markets accounted for 33 per cent with $252.5 billion. Bharti Airtel's $10.7 billion acquisition of Zain Africa was the largest Indian outbound deal of 2010 and the second largest on record.

The Asia Pacific targeted M&A volume reached $449.1 billion in the first nine months of 2010, wherein outbound deals contributed nearly half, with M&A volume totalling a record $214.9 billion in the first nine months 2010.

China was the top targeted nation with $137.4 billion, up 14 per cent from the same period last year. China was the third largest acquiring nation by volume globally just behind the US and the UK.

A sector-wise analysis shows that finance and oil and gas attracted the maximum deals with M&A transactions totalling $229.5 billion through 2,629 and 1,213 deals respectively, followed by telecom ($206 billion), healthcare ($178 billion) and real estate ($135.2 billion).

Goldman Sachs was the top advisor for both the US and the global M&A deals announced during the first nine months of this year while JP Morgan led in Europe and Bank of America Merrill Lynch was top in Asia Pacific (excluding Japan), the report said.

In India, Rothschild was the top adviser with $28.2 billion, followed by Bank of America Merrill Lynch and Standard Chartered with $25.3 billion and $22.3 billion, respectively.

India's Largest Mergers and Acquisition Deals

1.  Tata Steel-Corus: $12.2 billion

Image: B Mutharaman, Tata Steel MD; Ratan Tata, Tata chairman; J Leng, Corus chair; and P Varin, Corus CEO.

Photographs: Toby Melville/Reuters

On January 30, 2007, Tata Steel purchased a 100% stake in the Corus Group at 608 pence per share in an all cash deal, cumulatively valued at $12.2 billion.

It made Tata Steel the world's fifth-largest steel group.

2. Vodafone-Hutchison Essar: $11.1 billion

Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
Photographs: Punit Paranjpe/Reuters

On February 11, 2007, Vodafone agreed to buy out the controlling interest of 67% held by Li Ka Shing Holdings in Hutch-Essar for $11.1 billion.

3. Bharti-Zain Deal: $10.7 billion

In March 2010, Bharti entered into a legally binding definitive agrrement with Zain Group ("Zain") to acquire the sale of  100%  of Zain Africa BV , its African Business excluding its operations in Morocco and Sudan, based on an enterprise valuation of USD 10.7 billion.

Under the agreement, Bharti will acquire Zain's African mobile service operations in 15 countries with a total customer base of over 42 million.

4. Hindalco-Novelis: $6 billion

Image: Kumar Mangalam Birla (center), chairman of Aditya Birla Group.

Photographs: Punit Paranjpe/Reuters 

Aluminium and copper major Hindalco Industries, the Kumar Mangalam Birla-led Aditya Birla Group flagship, acquired Canadian company Novelis Inc in a $6-billion, all-cash deal in February 2007.

The acquisition made Hindalco the global leader in aluminium rolled products and one of the largest aluminium producers in Asia.

5. Ranbaxy-Daiichi Sankyo: $4.5 billion

Image: Malvinder Singh (left), ex-CEO of Ranbaxy, and Takashi Shoda, president and CEO of Daiichi Sankyo.
Photographs: Danish Ismail/Reuters

Marking the largest-ever deal in the Indian pharma industry, Japanese drug firm Daiichi Sankyo in June 2008 acquired the majority stake of more than 50 per cent in domestic major Ranbaxy for over Rs 15,000 crore ($4.5 billion).

The deal created the 15th biggest drugmaker globally.

6. ONGC-Imperial Energy: $2.8 billion

Image: Imperial Oil CEO Bruce March.
Photographs: Todd Korol/Reuters

The Oil and Natural Gas Corp took control of Imperial Energy Plc for $2.8 billion, in January 2009, after an overwhelming 96.8 per cent of London-listed firm's total shareholders accepted its takeover offer.

7. NTT DoCoMo-Tata Tele: $2.7 billion

Image: A man walks past a signboard of Japan's biggest mobile phone operator NTT Docomo Inc. in Tokyo.

Photographs: Stringer/Reuters

Japanese telecom giant NTT DoCoMo picked up a 26 per cent equity stake in Tata Teleservices for about Rs 13,070 crore ($2.7 billion) in November 2008.

With a subscriber base of 25 million in 20 circles DoCoMo paid Rs 20,107 per subscriber to acquire the stake.

DoCoMo picked up the equity through a combination of fresh issuance of equity and acquisition of shares from the existing promoters.

8. HDFC Bank-Centurion Bank of Punjab: $2.4 billion

Image: Rana Talwar (rear), Centurion Bank of Punjab chairman , and Deepak Parekh, HDFC Bank chairman.

Photographs: Arko Datta/Reuters

HDFC Bank approved the acquisition of Centurion Bank of Punjab for Rs 9,510 crore ($2.4 billion) in one of the largest mergers in the financial sector in India in February, 2008.

CBoP shareholders got one share of HDFC Bank for every 29 shares held by them. Post-acquisition, HDFC Bank became the second-largest private sector bank in India.

9. Tata Motors-Jaguar Land Rover: $2.3 billion

Image: A Union flag flies behind a Jaguar car emblem outside a dealership in Manchester, England.
Photographs: Phil Noble/Reuters

Creating history, one of India's top corporate entities, Tata Motors, in March 2008 acquired luxury auto brands -- Jaguar and Land Rover -- from Ford Motor for $2.3 billion, stamping their authority as a takeover tycoon.

Beating compatriot Mahindra and Mahindra for the prestigious brands, just a year after acquiring steel giant Corus for $12.1 billion, the Tatas signed the deal with Ford, which on its part chipped in with $600 million towards JLR's pension plan.

10. Sterlite-Asarco: $1.8 billion

Image: Vedanta Group chairman Anil Agarwal.
Photographs: Rediff Archives

Anil Agarwal-led Sterlite Industries Ltd's $1.8 billion Asarco LLC buyout deal is one of the biggest-ever merger and acquisitions deal involving an Indian firm, and the largest so far in 2009.

This is despite the deal size falling by almost $1 billion, from a projected estimate of $2.6 billion in May 2008, due to devaluation of mining assets and a sharp fall in copper prices.

Sterlite, the Indian arm of the London-based Vedanta Resources Plc, acquired Asarco in March 2008.

11. Suzlon-RePower: $1.7 billion

Image: Tulsi Tanti, chairman and managing director of Suzlon Energy Ltd.
Photographs: Chip East/Reuters

Wind power major Suzlon Energy in May 2007 acquired the German wind turbine manufacturer REpower for $1.7 billion. 

REpower is one of Germany's leading manufacturers of wind turbines, with a 10-per cent share of the overall market.

Suzlon is now the largest wind turbine maker in Asia and the fifth largest in the world.

12. RIL-RPL merger: $1.68 billion

 

Image: Reliance Industries' chairman Mukesh Ambani.
Photographs: Adnan Abidi/Reuters



Reliance Industries in March 2009 approved a scheme of amalgamation of its subsidiary Reliance Petroleum with the parent company. The all-share merger deal between the two Mukesh Ambani group firms was valued at about Rs 8,500 

Post-merger, RPL shareholders received one fully paid equity share of Rs 10 each of the company for every 16 fully paid equity shares of Rs 10 each of RPL held by them.

The RIL-RPL merger swap ratio was at 16:1. The merger became effective from April 1, 2008.

Example of a Buyout

Motilal Oswal buys out Goldman Sachs in Cremica
BS Reporter / Mumbai October 1, 2010, 0:29 IST

Motilal Oswal Private Equity Advisors Private Ltd (MOPE) has bought the 20 per cent stake of Goldman Sachs in Ludhiana-based food company Cremica.

According to persons close to the development, the private equity (PE) arm of Motilal Oswal Financial Services Ltd (MOFSL) bought the stake for around Rs 70 crore, valuing the company at Rs 350 crore. MOPE bought the stake through its India Business Excellence Fund (IBEF).

In 2006, Goldman Sachs had picked up the stake through its unit Jade Dragon (Mauritius) Ltd for close to Rs 70 crore, indicating that its exit had been on par, said the sources. In 2009-10, Cremica’s turnover was close to Rs 400 crore.

Raamdeo Agarwal, chairman of MOPE, said, “The food industry in India is in a high-growth phase. If the economy has to grow from one trillion dollars to two trillion dollars in the next four to five years, branded food consumption will increase with growing income levels. Companies like Cremica, which have established a strong presence in the last few decades, will benefit from this trend.”

For Motilal Oswal, this is the second such investment in the food processing industry in the last two years. In 2008, it had picked up a 11 per cent stake in Pune-based dairy products maker, Parag Milk, for Rs 60 crore.

Cremica, according to Director Akshay Bector, is engaged in the manufacturing and marketing of biscuits, buns and breads, liquid condiments etc. The company has plans to foray into segments such as syrups, mayonnaise, jams, fruit juices and ready-to-eat curries, pastes, etc. The company has five manufacturing units across the country.

IBEF has so far made 11 investments across sectors such as bulk packaging, power transformers, auto components, fast moving consumer goods, etc. Though sector agnostic, the fund is said to be skewed towards themes that are linked to the domestic consumption story.

Sizzling September: Over 22 cos approach Sebi for IPOs

Press Trust of India / New Delhi September 30, 2010, 16:36 IST

As many as 22 companies filed draft papers for initial share offers in September, the highest in any single month of 2010 so far, according to data from market regulator Sebi.

As per details available with the Securities and Exchange Board of India (Sebi), over 22 companies filed draft red herring prospectus (DHRP) for their proposed initial public offers in September.The DRHP of at least 22 firms has already been uploaded on the Sebi website, while some are still to be uploaded. The maximum number of DHRPs filed in a single month this year so far was 18 in March.
    
The companies that jumped on the IPO bandwagon during September include state-run Manganese Ore India Ltd and Hindustan Copper.
    
Some other big names include L&T Finance Holdings (Rs 1,500 crore), Kalpataru Ltd (Rs 1,000 crore) infra major HCC- promoted Lavasa Corporation (Rs 2,000 crore) and Kishore Biyani-promoted Future Ventures India (Rs 750 crore).
    
The rally in the secondary market and some good listings in recent weeks have also encouraged India Inc to tap the capital markets, analysts said.
    
The BSE benchmark Sensex regained the magical 20,000-level in September after a gap of 32 months. Equity analysts said the rally was driven by huge inflows from FIIs, which have invested over Rs 80,000 crore in local stocks so far this year.

TechM-Satyam merger to start by mid-Nov

Reuters / Hyderabad September 29, 2010, 19:40 IST

Tech Mahindra will start the process to merge outsourcer Mahindra Satyam with itself by mid-November, a top official of said on Wednesday.

Earlier, Mahindra Satyam reported a net loss of Rs 124.6 crore ($27.8 million) for the year ended March 2010, giving the first view of its financials almost two years after it was hit by India's biggest corporate fraud.

Tech Mahindra, which acquired Satyam in April 2009 and is operating it as an independent company, has said it can only merge the firm into the parent after the restated results for fiscal years 2009 and 2010 are announced.

MCX-SX to challenge Sebi order

Press Trust of India / Mumbai September 28, 2010, 21:27 IST

MCX Stock Exchange (MCX-SX) today said that it is seeking legal opinion on whether to approach the High Court or Securities Appellate Tribunal (SAT) to challenge Sebi's order that rejected its application to offer trading in segments like equities and equity derivatives.

"We will shortly take appropriate measures in consultation with our legal counsels to move the High Court or SAT," MCX-SX's MD & CEO Joseph Massey told reporters here.

Sebi, last week, rejected MCX-SX application to offer trading in segments like equities and equity derivatives, citing failure to comply with shareholding norms and illegal buyback agreements by promoters, among several other issues.

 

"The Sebi order goes on to reinforce our feeling that the regulator is biased. It is unfortunate that Sebi did not consider most of our submissions in its order. This leaves us with no other choice but to go to an appropriate forum for justice," Massey said.

The exchange has always maintained transparency in all its conduct and practices.

"We kept Sebi updated about every move of ours through letters and meetings, but Sebi never got back with any replies with any suggestions, solutions or deadlines," Massey said.

Massey also alleged that the scheme of reduction of capital was initially advised by Sebi and was informed to Sebi by a detailed letter in December 2009 immediately after filing the scheme.

"Sebi never questioned the scheme and our compliance with Manner of Increasing and Maintaining Public Shareholding (MIMPS) Regulations in all these eight months. Sebi raised these issues about the scheme only in its notice in August 2010, when we had already reached a point of 'irreversibility' on implementation of the scheme," he said.

Massey said that MIMPS policy was relaxed for NSE shareholders in December 2008 up to 15 per cent and the suggestions of MCX-SX was ignored by Sebi. NSE was also given 4-years for MIMPS compliance whereas MCX-SX was given only one year, Massey added.

Sebi also directed MCX-SX to approach CCI for predatory pricing in CD segment instead of resolving the same, Massey said.

Example of a Joint Venture

Wal-Mart, Bharti ink 50:50 joint venture

BS Reporter / New Delhi August 7, 2007

The world’s largest retailer, Wal-Mart, today announced a 50:50 joint venture with Bharti Enterprises for wholesale cash-and-carry business in India that will roll out 10-15 such outlets over seven years. This also covers a supply chain and back-end logistics.

The joint venture has been christened Bharti Wal-Mart Pvt Ltd and the first outlet will open by end-2008. The two companies had signed an agreement in November last year.

This marks the second foreign investment in the cash-and-carry business, after German company Metro AG, which entered five years ago.

Indian laws currently allow 100 per cent foreign direct investment (FDI) only in wholesale retail. Current foreign direct investment regulations do not permit global multi-brand retailers to enter India directly.

At present, 51 per cent FDI is allowed but only for single-brand outlets. “Our joint venture is in full conformity with existing laws,” said Rajan Mittal, MD, Bharti Enterprises.

Wal-Mart has gone ahead with its plans for India at a time when its competitors Tesco and Carrefour have decided to wait for FDI norms to be relaxed.

The joint venture company will initially concentrate on smaller cities in north India, and each store will be spread over 50,000 to 1 million square feet. The cash-and-carry outlets will sell fruit and vegetables, staple foods, stationery, clothing, consumer electronics and other general merchandise.

The targeted customers include small neighbourhood stores (kirana outlets) and fresh produce resellers, hotels and restaurants.

“There are 12 million kirana outlets in India; yet, less than 1 million of them are served directly by consumer goods companies. Our joint venture is well-poised to serve the targeted customer base and to also link the farmers and small manufacturers with customers,” said Raj Jain, country president for Wal-Mart’s operations in India.

The joint venture will source 90 per cent of the goods from India, while the rest will be imported. Wal-Mart today sources goods worth nearly $600 million from India, and this is expected to be multiplied many times over once the cash-and-carry outlets are operational.

Both companies declined to comment on projected investment, turnover or possible revenue realisation from this.

“Wal-Mart’s global vision is to save people’s money. We intend to do the same in India,” said Jain. Wal-Mart’s expertise lies in cutting costs with a technically superior supply chain. Bharti Retail has signed a franchise agreement with Wal-Mart for technical collaboration. It is still not known whether the Wal-Mart brand will be incorporated in Bharti Retails’ stores or even in the cash-and-carry outlets. “We will unveil the brand closer to the launch,” said Mittal.

As M&A activity picks up, white knights are riding into India Inc

Business Standard/Ranju Sarkar / New Delhi September 28, 2010, 0:28 IST

However, the corporate landscape is strewn with instances of benefactors actually turning into predators.

In 2007, Israeli drugmaker Taro Pharmaceutical was in trouble. Inventories and debtors mounted, and it ran out of cash after a string of US acquisitions. When Dilip Shanghvi, chairman of Sun Pharma, stepped in as a white knight and offered to merge the two companies in a $454-million deal, little did he realise that it would ultimately take a three-year legal battle to gain control of Taro.

Cut to August this year. When an arm of Reliance Industries Ltd (RIL) picked up 14.12 per cent stake in hotelier EIH Ltd, Mukesh Ambani donned a new avatar. As a white knight, Ambani helped EIH owner Prithvi Raj Oberoi counter a possible bid by ITC Ltd. The cigarette-to-hospitality-to-FMCG major has mopped up 14.98 per cent stake in the hotel company over the years.

By bringing in a strong third shareholder with a large stake, Oberoi managed to shore up his defences against ITC. ‘‘If ITC, with 14.98 per cent stake, executed an open offer, there was no way the Oberois could have countered it. At best, they could have raised their stake by 5 per cent every year,’’ explained Himani Singh, an analyst with Elara Capital.

In one fell swoop, Oberoi managed to pit a stronger force (RIL) against ITC, in effect neutralising the marauder, had it decided to launch an open offer. ITC has maintained for a decade that it would not launch a hostile bid for EIH, but its stake was too high for the Oberoi’s comfort. Indeed, before inking the deal with RIL, the Oberois had tried to rope in Analjit Singh of Max, who holds 4 per cent stake in EIH.

A white knight – or, a company that thwarts a hostile takeover of a target company by executing a friendly takeover instead —is a common phenomenon in global M&As. When Mittal Steel, for instance, went after Arcelor, the European steelmaker approached Russian peer Severstal to help it ward off the Lakshmi Mittal-led group. Though it is a relatively new phenomenon in India, there are already a few instances of domestic companies playing white knight.

In many cases, of course, financial institutions like Life Insurance Corporation or government-controlled banks have come to the rescue of Indian companies facing takeover threats. The most celebrated of these cases were attempts by RIL to take over Larsen & Toubro and by UK’s BAT to wrest control of local arm ITC.

In a more recent instance, K Raghavendra Rao, the promoter of Orchid Chemicals & Pharmaceuticals Ltd, managed to garner the support of institutional investors to ward off a takeover bid by Solrex (believed to be controlled by brothers Malvinder and Shivinder Singh, erstwhile owners of Ranbaxy Laboratories). Solrex had picked up 12 per cent stake in Orchid. Institutions, which together held 38 per cent, backed Rao.

In 2000, the promoters of realty firm Gesco Corporation turned to the Mahindras to counter a hostile bid by Delhi-based Abhishek Dalmia. The Sheths of Gesco were caught napping when Dalmia’s Renaissance Estates used a low share price to buy over 10 per cent stake in Gesco and mounted an open offer for another 45 per cent.

The Sheths turned to master strategist Deepak Parkeh of HDFC. He roped in the Mahindras and its group firm, Mahindra Realty & Infrastructure, to make a counter offer with the Sheths for 33.5 per cent of Gesco. The battle ended after Dalmia sold his 10.5 per cent stake in Gesco to the Sheth-Mahindra combine and made a killing.

Dwijedra Tripathi, a former professor at IIM-Ahmedabad and a business historian, feels that as M&A activity picks up in the country, we could see even more attempts at hostile takeovers and the appearance of white knights.

But sometimes, a white knight could turn predator, as another faction of the Sheth family discovered recently. In 2009, Vijay Kantilal Sheth, the promoter of Great Offshore Ltd (GOL), was in trouble when lenders made margin calls under a share-pledge deal. The promoters of Bharati Shipyard stepped in to help Sheth with the required cash.

Although Bharati Shipyard’s PC Kapoor maintained that it was only a strategic investor, it subsequently wrested around 14.89 per cent stake in GOL, making itself the largest shareholder, and launched an open offer for another 20 per cent. This was the first instance in the history of corporate India, where pledged shares were invoked.

The battle to acquire GOL intensified after ABG Shipyard made a counter offer to acquire 33.8 per cent. Both continued mopping up shares from the market and revising the offer price in a takeover battle that lasted over six months. It finally came to an end when ABG Shipyard exited the race and Bharati Shipyard took control of GOL.

A white knight can even be perceived as a black knight -- as Ramesh Vangal’s experience at Tamilnad Merchantile Bank (TMB) reveals. In May 2007, when Vangal and his friends stepped in to to buy out C Sivasankaran's stake in the bank, he was seen as a white knight. But his attempt to place his nominees on the board met with stiff resistance from the Nadar community, who feared outsiders would take control of bank that it controlled.

Ironically, Sivasankaran himself had come in as a white knight to buy out the Ruias of Essar Group, who had cornered 67 per cent in the bank. When Reserve Bank of India ruled that an industrial group could not run a bank, the Ruias agreed to sell the stake back to the community, but at a high price. That’s when Sivasankaran came in as an investor and bought the Essar stake. He agreed to sell it back to the Nadars at 2.38 times the price, but they could afford to buy back only half the stake.

TMB has been mired in an ownership battle between brothers Sivanthi Adityan, who runs one of the largest Tamil dailies, Daily Thanthi, and Ramachandra Adityan. In January, Sivanthi, with the support of the Nadar Mahajana Sangam and foreign investors, wrested control of TMB’s board. Ramachandra had earlier fought to retrieve the bank from Sivasankaran, but later opposed the entry of non-Nadar groups.

Unilever to buy Alberto for $3.7 bn as growth plan

Unilever’s biggest acquisition in a decade will add brands such as V05, TRESemme and Nexxus to Unilever’s existing Dove and Sunsilk.

London: Consumer goods group Unilever Plc/NV will buy US hair and skin care company Alberto Culver for $3.7 billion in the latest move to rebalance its portfolio towards higher growth lines.

Unilever’s biggest acquisition in a decade will add brands such as V05, TRESemme and Nexxus to Unilever’s existing Dove and Sunsilk, and make it the world’s leading company in hair conditioning and the second largest in shampoo.

Analysts said the price of the deal looked high but could be justified by as-yet unspecified cost savings and by skewing Unilever’s business to more high growth, high margin categories compared to its other food and detergent businesses.

The acquisition follows a yet-to-be completed deal to buy Sara Lee’s bodycare division for $1.3 billion and will also mark Unilever’s biggest acquisition since its massive Bestfoods deal in 2000.

“The initial consideration for Alberto Culver of 14.8 times EBITDA (earnings before interest, tax, depreciation and amortisation) on the face of it looks quite punchy but we believe ‘significant´ but as yet undisclosed synergies will make the price look more reasonable,” said analyst Graham Jones at brokers Panmure Gordon.

Unilever Plc shares rose 2.23% to 18.33 pounds by 3:56pm, in a little changed London stock market as other analysts said the deal will give Unilever greater hair care sales in the US where it has struggled in recent years.

The deal will be chief executive Paul Polman’s second big acquisition since he took over the helm at Unilever in January 2009, and both the Alberto Culver and Sara Lee deals are in personal care, the company’s biggest and fastest growing business line. “Personal care is a strategic category for Unilever and growing rapidly. Ten years ago it represented 20% of our turnover; strong organic growth has driven it to now reach over 30%, with strong positions in many of the emerging markets,” Polman said in a statement on Monday.

Its brands will complement Unilever’s existing brands like Dove, Clear and Sunsilk in hair care, and Pond’s and Vaseline in skincare, and enhance Unilever’s presence in emerging markets such as Mexico and also in the more mature markets of the U.S., Canada, Britain, and Australasia.

Unilever’s proposed acquisition of Sara Lee Sanex deordorant and Radox bodycare business, first announced last September, is priced at around 10 times EBITDA, a relatively low price to reflect the disparate collection of brands being acquired.

The European Union is still examining the deal and is set to rule by Oct 26, and analysts expect Unilever to be required to divest some deodorant businesses to clear the deal which it hopes to complete in the fourth quarter..

Alberto Culver made annual sales of nearly $1.6 billion and EBITDA of over $250 million in the 12-month period ending June 30, 2010.

“Bolt-on acquisitions such as Alberto Culver supplement organic growth and add powerful new brands to our portfolio,” Polman added.

The US-based group has operations in nine countries, including the US, Canada, Argentina, Mexico, Britain, South Africa and Australasia. It has six manufacturing plants and employs around 2,700 people.

In another personal care deal, Britain’s PZ Cussons said it had bought the tanning-products firm St Tropez from its private equity owner LDC for 62.5 million pounds.

Corus adopts Tata Steel as its new identity

27 Sep, 2010, 06.13PM IST,AGENCIES

 

LONDON: The Tata Steel name and logo will begin to appear on the company's transactional documents, product deliveries, locations and vehicles. Not everything will change immediately, however, as the re-branding will be a gradual process.

Corus joined the Tata Steel family in April 2007 in a transaction that created one of the world’s largest steelmakers, with a major presence in Europe as well as Asia. Like Corus and its predecessors, Tata Steel has a history of having pioneered the first integrated steelworks in India a century ago.

Kirby Adams, MD & CEO of Tata Steel Europe, said: “The companies that comprise Tata Steel Europe have evolved over many decades from local to national to regional players. They now form part of one of the world's top ten steelmakers, with a wide product range, a relatively high degree of raw materials self-sufficiency and a global market reach from manufacturing sites across Europe and Asia.

"This is the right time to enter a new era under the Tata Steel name, now that we have successfully returned the company to profit following the global financial crisis. This brand migration will lead to the Tata Steel name becoming much more prominent and widely recognised across Europe and will reinforce our sense of belonging to the Tata Steel family.”

Tata Steel, which is listed on Bombay and National Stock Exchanges, is a member of the Tata Group, one of India’s largest business houses.

Tata Steel Europe (formerly Corus) is Europe's second largest steel producer. With main steelmaking operations in the UK and the Netherlands, the company supplies steel and related services to the construction, automotive, packaging, material handling and other demanding markets worldwide. The combined Group has an aggregate crude steel capacity of more than 28 million tonnes and approximately 80,000 employees across four continents.

TAKEOVER WEEK

Overview of Mergers and Acquisition

 Overview Of Mergers & Acquisitions

What is a Greenshoe Option?

Number of students are coming with a query of what is a Green Shoe Option, let me explain you:

The greenshoe option is a clause in the underwriting agreement of an IPO, which allows to sell additional shares, usually 15%, to the public if the demand exceeds expectations and the stock trades above its offering price.

This option, also known as the over-allotment provision. It gets its name from the Green Shoe company, which was the first company to allow such an option. 

Example:

ABC to embrace 'Green shoe' option

(China Daily)
Updated: 2010-07-13 11:17

In the ABC A-share offering, lead underwriters are entitled to exercise the green shoe option within 30 days following its listing.

Agricultural Bank of China (ABC) is the second company in the history of the Shanghai stock exchange to embrace the "green shoe" option - known in legal jargon as an over-allotment option - which allows members of its initial public offering (IPO) underwriting syndicate to sell additional shares if demand exceeds the original offering.

The green shoe can offer up to 15 percent more shares than the original number set by the issuer as a way for underwriters to stabilize the price of a new issue after its trading debut.

The name is derived from the Green Shoe Manufacturing Co, a boot maker founded in 1919 in the United States, the first company to permit underwriters to use this practice in its offering.

When used, the option aims to maintain the share price in the initial listing period and engineer a smooth transition to the secondary market.

The exercise is also expected to greatly lower investor risks for retail investors who subscribe to its online IPO tranche.

Industrial and Commercial Bank of China (ICBC), the world's biggest lender by market value, was the first Chinese company to use the green shoe practice in the A-share market in 2006 during what was then the world's biggest IPO.

ICBC priced its A-share IPO at 3.12 yuan and closed at 3.28 yuan on its first day of trading in Shanghai on October 27, 2006.

Its share prices later declined to as low as 3.25 yuan before rebounding to close the year at 6.36 yuan, or up 103.8 percent from its IPO price. 16 Aug, 2010, 03.56AM IST,ET Bureau

Greenshoe option makes

AgBank IPO the biggest

16 Aug, 2010, 03.56AM IST,ET Bureau

SHANGHAI: Agricultural Bank of China, or AgBank, boosted the size of its initial public offering to $22.1 billion after selling more stock in Shanghai, making it the world’s largest first-time share sale.


China’s biggest lender by customers said on Sunday it had fully exercised an over-allotment option, also known as a greenshoe, for the Shanghai portion of its initial public offering, selling a further 3.34 billion shares at the IPO price of 2.68 yuan apiece. That increased the Shanghai portion of the lender’s IPO to 67.6 billion yuan ($9.9 billion).


Over-allotments are released when demand for the shares in the after-market is heavy. Underwriters release the shares, set aside at the original IPO price, to the allocated holders who then become public stockholders.


AgBank had already exercised a similar option for its Hong Kong portion last month. The exercise of the over-allotment brings the number of shares sold in AgBank’s Hong Kong and Shanghai offerings to 54.79 billion, increasing the original $19.3 billion raised by 15%.


The expansion propels AgBank’s IPO past Industrial and Commercial Bank of China’s $21.9 billion sale in 2006 to become the world’s largest. The bank raised $20.8 billion selling shares in Hong Kong and Shanghai last month as chairman Xiang Junbo braved a stock-market rout that drove the Chinese benchmark index to a 15-month low.


AgBank has declined 0.4% since its July 15 debut in Shanghai, while in Hong Kong, where the stock started trading a day later, the shares have advanced 3.7%. Domestic investors in China ordered more than 10 times the stock available to them.


The Beijing-based lender is the last major Chinese bank to sell shares to the public, wrapping up a decade-long overhaul of the nation’s banking industry that cost the government an estimated $650 billion in bailouts and restructuring programmes.


China’s five biggest banks intend to raise a total of $63 billion this year by selling bonds and shares to replenish capital eroded by a record $1.4 trillion of new loans last year.


Rural Roots


The IPO of AgBank, once the weakest lender in China, makes the nation home to four of the world’s 10 biggest banks by market value, half a decade after the country’s first major state-owned lender went public.


The lender, established to serve the country’s farmers and less affluent rural areas, boosted profit by 26% to 65 billion yuan last year, and forecasts net income will rise to at least 82.9 billion yuan in 2010, according to its prospectus. China’s economic growth slowed to 10.3% in the second quarter from 11.9% in the previous three months.


China International Capital, Citic Securities, China Galaxy Securities and Guotai Junan Securities are managing the yuan-denominated A-share offer.

Greenshoe Option Helps China's Agricultural Bank Raise $22B

by CFO Innovation Staff, 16 August 2010

The Agricultural Bank of China Ltd has raised a total of $22.1 billion from its dual listing in Hong Kong and Shanghai to $22.1 billion, beating the record held by Industrial & Commercial Bank of China Ltd. for its $21.93 billion IPO in 2006, reports the Wall Street Journal.

Agbank exercised the overallotment option—also known as a greenshoe—after struggling to stir interest among investors.

The overallotment option is a tool used by underwriters to limit volatility in a stock's price for a month after it lists. Prior to listing in Shanghai, AgBank said it had sold 15% more shares than it planned to issue in the IPO, notes the Journal.