The process of mergers and acquisitions has gained substantial importance in today's corporate world. This process is extensively used for restructuring the business organizations. In India, the concept of mergers and acquisitions was initiated by the government bodies. Some well known financial organizations also took the necessary initiatives to restructure the corporate sector of India by adopting the mergers and acquisitions policies. The Indian economic reform since 1991 has opened up a whole lot of challenges both in the domestic and international spheres. The increased competition in the global market has prompted the Indian companies to go for mergers and acquisitions as an important strategic choice. The trends of mergers and acquisitions in India have changed over the years. The immediate effects of the mergers and acquisitions have also been diverse across the various sectors of the Indian economy.
Mergers and Acquisitions Across Indian Sectors
Among the different Indian sectors that have resorted to mergers and acquisitions in recent times, telecom, finance, FMCG, construction materials, automobile industry and steel industry are worth mentioning. With the increasing number of Indian companies opting for mergers and acquisitions, India is now one of the leading nations in the world in terms of mergers and acquisitions.
The merger and acquisition business deals in India amounted to $40 billion during the initial 2 months in the year 2007. The total estimated value of mergers and acquisitions in India for 2007 was greater than $100 billion. It is twice the amount of mergers and acquisitions in 2006.
Mergers and Acquisitions in India: the Latest Trends
Till recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not so common. The situation has undergone a sea change in the last couple of years. Acquisition of foreign companies by the Indian businesses has been the latest trend in the Indian corporate sector.
There are different factors that played their parts in facilitating the mergers and acquisitions in India. Favorable government policies, buoyancy in economy, additional liquidity in the corporate sector, and dynamic attitudes of the Indian entrepreneurs are the key factors behind the changing trends of mergers and acquisitions in India.
The Indian IT and ITES sectors have already proved their potential in the global market
. The other Indian sectors are also following the same trend. The increased participation of the Indian companies in the global corporate sector has further facilitated the merger and acquisition activities in India.
Major Mergers and Acquisitions in India
Recently the Indian companies have undertaken some important acquisitions. Some of those are as follows:
Hindalco acquired Canada based Novelis. The deal involved transaction of $5,982 million. Tata Steel acquired Corus Group plc. The acquisition deal amounted to $12,000 million. Dr. Reddy's Labs acquired Betapharm through a deal worth of $597 million.Ranbaxy Labs acquired Terapia SA. The deal amounted to $324 million. Suzlon Energy acquired Hansen Group through a deal of $565 million. The acquisition of Daewoo Electronics Corp. by Videocon involved transaction of $729 million. HPCL acquired Kenya Petroleum Refinery Ltd.. The deal amounted to $500 million. VSNL acquired Teleglobe through a deal of $239 million.
When it comes to mergers and acquisitions deals in India , the total number was 287 from the month of January to May in 2007. It has involved monetary transaction of US $47.37 billion. Out of these 287 merger and acquisition deals, there have been 102 cross country deals with a total valuation of US $28.19 billion.
Tuesday, September 28, 2010
India's Bharti Airtel completes acquisition of Zain Africa
June 08, 2010 08:51 AM ET
Bharti Airtel, India's largest mobile services company, said Tuesday that it has completed the acquisition of the African operations of Mobile Telecommunications Company (known as Zain), thus fulfilling the company's ambitions to expand into markets outside India.
The agreement signed with Zain earlier this year covers 15 countries in Africa but not Zain's operation in Sudan, nor its investments in Morocco.
Bharti Airtel said it had acquired Zain Africa for an enterprise value of US$10.7 billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131 million subscribers it had in India at the end of April.
A challenge for Bharti Airtel will be to integrate the operations of Zain Africa in all 15 countries, which currently operate largely as stand-alone units, said Kamlesh Bhatia , a principal research analyst at Gartner.
Zain said Tuesday that it had received $7.9 billion in cash from Bharti Airtel. Over the next six months, Zain expects to receive an additional $400 million upon certain milestones being achieved, it said. The balance of $700 million is due one year from completion of the acquisition.
Bharti Airtel will also assume $1.7 billion of consolidated debt obligations, under the agreement between the two companies.
The large payout by Bharti Airtel comes in addition to Indian rupees 123 billion ($2.6 billion) it paid last month to the Indian government for 3G spectrum in a recently concluded auction.
The large payouts on both counts by Bharti Airtel is likely to have increased the company's debt considerably, Bhatia said. A new investment that is coming up for the company is the roll out of 3G services once spectrum is allotted to it by the government by September this year.
Bharti Airtel's bid for Zain's operations came after the company failed twice to arrive at an agreement with the MTN Group in South Africa. That plan did not meet with the approval of the South African government, which wanted to maintain MTN's separate identity.
By expanding its business outside the country, Bharti Airtel can in the long term benefit from economies of scale, including getting better deals from suppliers, Bhatia said.
Bharti Airtel is also looking outside India to boost its margins, as the Indian market has become very competitive, with voice call rates sometimes as low as 0.01 rupees per second. Voice calls were earlier charged by the minute.
The company reported a decline in profits and flat revenue for the quarter ended March 31, even though its customer base grew 35 percent over the same quarter last year.
Bharti has operations in Sri Lanka, and also acquired a majority stake in Warid Telecom, the fourth largest operator in Bangladesh.
Bharti Airtel, India's largest mobile services company, said Tuesday that it has completed the acquisition of the African operations of Mobile Telecommunications Company (known as Zain), thus fulfilling the company's ambitions to expand into markets outside India.
The agreement signed with Zain earlier this year covers 15 countries in Africa but not Zain's operation in Sudan, nor its investments in Morocco.
Bharti Airtel said it had acquired Zain Africa for an enterprise value of US$10.7 billion. The acquisition gives Bharti Airtel a total customer base of 180 million, including 131 million subscribers it had in India at the end of April.
A challenge for Bharti Airtel will be to integrate the operations of Zain Africa in all 15 countries, which currently operate largely as stand-alone units, said Kamlesh Bhatia , a principal research analyst at Gartner.
Zain said Tuesday that it had received $7.9 billion in cash from Bharti Airtel. Over the next six months, Zain expects to receive an additional $400 million upon certain milestones being achieved, it said. The balance of $700 million is due one year from completion of the acquisition.
Bharti Airtel will also assume $1.7 billion of consolidated debt obligations, under the agreement between the two companies.
The large payout by Bharti Airtel comes in addition to Indian rupees 123 billion ($2.6 billion) it paid last month to the Indian government for 3G spectrum in a recently concluded auction.
The large payouts on both counts by Bharti Airtel is likely to have increased the company's debt considerably, Bhatia said. A new investment that is coming up for the company is the roll out of 3G services once spectrum is allotted to it by the government by September this year.
Bharti Airtel's bid for Zain's operations came after the company failed twice to arrive at an agreement with the MTN Group in South Africa. That plan did not meet with the approval of the South African government, which wanted to maintain MTN's separate identity.
By expanding its business outside the country, Bharti Airtel can in the long term benefit from economies of scale, including getting better deals from suppliers, Bhatia said.
Bharti Airtel is also looking outside India to boost its margins, as the Indian market has become very competitive, with voice call rates sometimes as low as 0.01 rupees per second. Voice calls were earlier charged by the minute.
The company reported a decline in profits and flat revenue for the quarter ended March 31, even though its customer base grew 35 percent over the same quarter last year.
Bharti has operations in Sri Lanka, and also acquired a majority stake in Warid Telecom, the fourth largest operator in Bangladesh.
Monday, September 27, 2010
Unilever Agrees to Buy Alberto Culver for $3.7 Billion
Unilever, the maker of Dove soap, agreed to buy Alberto Culver Co. for $3.7 billion in cash to add VO5, Nexxus and TRESemme hair-care products in the company’s biggest purchase in a decade.
Unilever will pay $37.50 a share for the Melrose Park, Illinois-based business, Alberto Culver said in a statement today. That’s about 19 percent more than the closing price on Sept. 24. The purchase will add to earnings per share in its first year, Unilever said in a separate statement.
Chief Executive Officer Paul Polman is expanding in home and personal-care products as part of a plan to double total sales. Unilever spent much of the decade shedding brands following the 2000 purchase of Bestfoods. Polman, who joined in 2009 after a career at Nestle SA and Procter & Gamble Co., agreed to buy Sara Lee Corp.’s body-care operations last year.
“It’s a sensible deal, has good strategic rationale and is positive, but it’s not transformational -- it’s a bolt-on deal like the Sara Lee one,” said Martin Deboo, an analyst at Investec Securities in London.
Unilever rose as much as 2.1 percent to 22.31 euros a share in Amsterdam and traded at 22.21 euros as of 1:12 p.m. The stock has declined 2.4 percent this year.
‘Massive Brands’
Alberto Culver had sales of $1.6 billion and earnings before interest, taxes, depreciation and amortization of $250 million for the 12-month period ended June 30, according to Unilever. Unilever offered to pay 1.7 times annual revenue for the Sara Lee business.
“It’s a perfect synergy because Alberto Culver is a midcap stock with some massive brands,” Victoria Collin, a London- based analyst at Atlantic Equities, said today. “TRESemme is the jewel in its crown and the sales are relatively high.”
The purchase makes Unilever the biggest maker of hair conditioning products in the world and the second-largest in shampoo, it said today. It will be the third-largest in styling.
Unilever entered the professional hair-product market in 2009 with the purchase of the TIGI salon brands from the creators of Toni & Guy for $411.5 million. The Alberto Culver acquisition includes Simple, a skin-care company it bought in 2009 for about 240 million pounds ($379 million).
“Personal care is a strategic category for Unilever and growing rapidly,” Polman commented today in the statement. “Ten years ago it represented 20 percent of our turnover; strong organic growth has driven it to now reach over 30 percent.”
Expansion
In August, the executive said that he saw about 80 percent of so-called organic growth coming from emerging markets, driven by the health and personal-care sector, which is “easier to do than with some of our food brands.”
Unilever is aiming to expand outside of western Europe, the only region where its sales fell in the first half, amid sluggish consumer spending and increasing competition from rivals including Procter & Gamble and Nestle. Alberto Culver made about 64 percent of its sales in the United States in the year ended September, 2009, according to Bloomberg data.
The mass-market haircare sector in the U.S. has been showing “low single-digit” declining growth, according to Collin. Alberto Culver’s third-quarter sales rose 11 percent, excluding the impact of currency fluctuations and acquisition, it said in July.
Divestments
The maker of Knorr soups on Sept. 24 agreed to sell its consumer tomato products business in Brazil to Cargill Inc. for about 260 million euros ($350 million). The company sold its Italian frozen-foods unit in July for about 805 million euros.
Unilever was advised by Morgan Stanley and UBS AG, according to spokesman Paul Matthews. BDT & Company was Alberto Culver’s financial adviser, while Credit Suisse Securities LLC provided a fairness opinion, the company said in a statement. The acquisition will be funded from existing cash resources.
Unilever will pay $37.50 a share for the Melrose Park, Illinois-based business, Alberto Culver said in a statement today. That’s about 19 percent more than the closing price on Sept. 24. The purchase will add to earnings per share in its first year, Unilever said in a separate statement.
Chief Executive Officer Paul Polman is expanding in home and personal-care products as part of a plan to double total sales. Unilever spent much of the decade shedding brands following the 2000 purchase of Bestfoods. Polman, who joined in 2009 after a career at Nestle SA and Procter & Gamble Co., agreed to buy Sara Lee Corp.’s body-care operations last year.
“It’s a sensible deal, has good strategic rationale and is positive, but it’s not transformational -- it’s a bolt-on deal like the Sara Lee one,” said Martin Deboo, an analyst at Investec Securities in London.
Unilever rose as much as 2.1 percent to 22.31 euros a share in Amsterdam and traded at 22.21 euros as of 1:12 p.m. The stock has declined 2.4 percent this year.
‘Massive Brands’
Alberto Culver had sales of $1.6 billion and earnings before interest, taxes, depreciation and amortization of $250 million for the 12-month period ended June 30, according to Unilever. Unilever offered to pay 1.7 times annual revenue for the Sara Lee business.
“It’s a perfect synergy because Alberto Culver is a midcap stock with some massive brands,” Victoria Collin, a London- based analyst at Atlantic Equities, said today. “TRESemme is the jewel in its crown and the sales are relatively high.”
The purchase makes Unilever the biggest maker of hair conditioning products in the world and the second-largest in shampoo, it said today. It will be the third-largest in styling.
Unilever entered the professional hair-product market in 2009 with the purchase of the TIGI salon brands from the creators of Toni & Guy for $411.5 million. The Alberto Culver acquisition includes Simple, a skin-care company it bought in 2009 for about 240 million pounds ($379 million).
“Personal care is a strategic category for Unilever and growing rapidly,” Polman commented today in the statement. “Ten years ago it represented 20 percent of our turnover; strong organic growth has driven it to now reach over 30 percent.”
Expansion
In August, the executive said that he saw about 80 percent of so-called organic growth coming from emerging markets, driven by the health and personal-care sector, which is “easier to do than with some of our food brands.”
Unilever is aiming to expand outside of western Europe, the only region where its sales fell in the first half, amid sluggish consumer spending and increasing competition from rivals including Procter & Gamble and Nestle. Alberto Culver made about 64 percent of its sales in the United States in the year ended September, 2009, according to Bloomberg data.
The mass-market haircare sector in the U.S. has been showing “low single-digit” declining growth, according to Collin. Alberto Culver’s third-quarter sales rose 11 percent, excluding the impact of currency fluctuations and acquisition, it said in July.
Divestments
The maker of Knorr soups on Sept. 24 agreed to sell its consumer tomato products business in Brazil to Cargill Inc. for about 260 million euros ($350 million). The company sold its Italian frozen-foods unit in July for about 805 million euros.
Unilever was advised by Morgan Stanley and UBS AG, according to spokesman Paul Matthews. BDT & Company was Alberto Culver’s financial adviser, while Credit Suisse Securities LLC provided a fairness opinion, the company said in a statement. The acquisition will be funded from existing cash resources.
Southwest Agrees to Buy AirTran for $1.4 Billion
Sept. 27 (Bloomberg) -- Southwest Airlines Co., the largest U.S. low-fare carrier, agreed to buy AirTran Holdings Inc. for about $1.4 billion in cash and stock, giving it access to Atlanta, the world’s busiest airport.
In the past five years, the U.S. airline sector has seen 9 acquisitions of publicly traded companies with an average premium of 34 percent, according to data compiled by Bloomberg. Southwest is paying 5.4 times AirTrans earnings before interest tax depreciation and amortization, compared with the median multiple of 4.8.
Atlanta, AirTran’s biggest hub, is the largest U.S. market Dallas-based Southwest doesn’t already serve. The purchase also fulfills Southwest’s goal of adding flights to Mexico and the Caribbean, and expands its presence at New York’s LaGuardia and Boston’s Logan airports.
“It’s a perfect fit,” said Ray Neidl, an analyst at Maxim Group LLC in New York who doesn’t rate the stocks. “This fills a big hole in the southeast for Southwest, and they’re getting a very good asset while also eliminating a competitor that would have overlapped with them eventually.”
This is the first acquisition in at least the past five years for Southwest, according data compiled by Bloomberg.
AirTran Value
The offer values Orlando, Florida-based AirTran at $7.69 a share, 69 percent more than its closing price on Sept. 24, Southwest said today in a statement. The transaction price includes AirTran’s convertible notes.
Southwest declined 7 cents to $12.21 at 8:57 a.m. before the start of New York Stock Exchange composite trading. Before today, the shares had advanced 7.4 percent this year. AirTran jumped $2.71, or 60 percent, to $7.26. Through Sept. 24, its shares had dropped 13 percent this year.
The acquisition “takes a significant step toward positioning us for future growth,” Southwest Chief Executive Officer Gary Kelly said in the statement.
The merger announcement comes as United Airlines parent UAL Corp. merges with Continental Airlines Inc., creating the world’s biggest carrier.
Under the agreement, each of AirTran’s common shares will be exchanged for $3.75 in cash and 0.321 shares of Southwest common stock. Including AirTran debt and capitalized aircraft operating leases, the transaction has a total value of about $3.4 billion, the airlines said.
Convertible Notes
AirTran’s debt as of June 30 included about $280 million in convertible notes, according to a July regulatory filing.
Southwest will partially fund the purchase with $670 million from its cash on hand. The Dallas-based carrier has $3.3 billion in cash and short-term investments, and an available $600 million revolving credit line.
The combined carrier will have 43,000 employees and will serve more than 100 airports in the U.S., Mexico and the Caribbean.
The combination will add Boeing Co.’s 717 to Southwest’s fleet of Boeing 737s. The fleet will total 685 active aircraft.
Citigroup Global Markets Inc. and Dahlman Rose & Co. served as financial advisers to Southwest Airlines. Vinson & Elkins LLP acted as legal counsel.
In the past five years, the U.S. airline sector has seen 9 acquisitions of publicly traded companies with an average premium of 34 percent, according to data compiled by Bloomberg. Southwest is paying 5.4 times AirTrans earnings before interest tax depreciation and amortization, compared with the median multiple of 4.8.
Atlanta, AirTran’s biggest hub, is the largest U.S. market Dallas-based Southwest doesn’t already serve. The purchase also fulfills Southwest’s goal of adding flights to Mexico and the Caribbean, and expands its presence at New York’s LaGuardia and Boston’s Logan airports.
“It’s a perfect fit,” said Ray Neidl, an analyst at Maxim Group LLC in New York who doesn’t rate the stocks. “This fills a big hole in the southeast for Southwest, and they’re getting a very good asset while also eliminating a competitor that would have overlapped with them eventually.”
This is the first acquisition in at least the past five years for Southwest, according data compiled by Bloomberg.
AirTran Value
The offer values Orlando, Florida-based AirTran at $7.69 a share, 69 percent more than its closing price on Sept. 24, Southwest said today in a statement. The transaction price includes AirTran’s convertible notes.
Southwest declined 7 cents to $12.21 at 8:57 a.m. before the start of New York Stock Exchange composite trading. Before today, the shares had advanced 7.4 percent this year. AirTran jumped $2.71, or 60 percent, to $7.26. Through Sept. 24, its shares had dropped 13 percent this year.
The acquisition “takes a significant step toward positioning us for future growth,” Southwest Chief Executive Officer Gary Kelly said in the statement.
The merger announcement comes as United Airlines parent UAL Corp. merges with Continental Airlines Inc., creating the world’s biggest carrier.
Under the agreement, each of AirTran’s common shares will be exchanged for $3.75 in cash and 0.321 shares of Southwest common stock. Including AirTran debt and capitalized aircraft operating leases, the transaction has a total value of about $3.4 billion, the airlines said.
Convertible Notes
AirTran’s debt as of June 30 included about $280 million in convertible notes, according to a July regulatory filing.
Southwest will partially fund the purchase with $670 million from its cash on hand. The Dallas-based carrier has $3.3 billion in cash and short-term investments, and an available $600 million revolving credit line.
The combined carrier will have 43,000 employees and will serve more than 100 airports in the U.S., Mexico and the Caribbean.
The combination will add Boeing Co.’s 717 to Southwest’s fleet of Boeing 737s. The fleet will total 685 active aircraft.
Citigroup Global Markets Inc. and Dahlman Rose & Co. served as financial advisers to Southwest Airlines. Vinson & Elkins LLP acted as legal counsel.
Wal-Mart in talks to buy South Africa's Massmart
World's biggest supermarket plans move into Africa with $4.2bn scheme to buy South Africa's third-largest retailer
Wal-Mart, the world's largest retailer, is planning a major move into the fast-expanding African market, announcing today that it is in talks to buy South Africa's third-largest retailer, Massmart.
The move, which would be worth $4.2bn (£2.65bn), will be overseen by Asda's chairman, Andy Bond, who is responsible for operations in Africa. Wal-Mart is offering 148 rand (£13.40) a share for Massmart, which is nearly 10% higher than its last closing price.
The acquisition would be Africa's biggest deal in more than a decade, and Wal-Mart's largest since it bought the UK supermarket chain Asda in 1999. In May, it agreed to acquire 194 stores in the UK from the Danish discount chain Netto for nearly £800m, although competition regulators are forcing it to sell 25% of the shops.
Bond said: "South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries. South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy."
He said Wal-Mart supported Massmart's black economic empowerment programme and would aim to be a "corporate and retail role model".
Massmart, headquartered in Johannesburg, runs 290 shops, mostly in South Africa, with 24 stores in 12 other African countries including Botswana, Zimbabwe, Tanzania, Nigeria and Ghana. It manages eight wholesale and retail chains under various brand names. The group reported sales of $6.1bn last year.
Syd Vianello, an analyst at Nedcor Securities, said: "It's a big vote of confidence for the South African retail economy and for South Africa."
Wal-Mart is expanding into emerging markets to make up for a slowdown in the US, where like-for-like sales have fallen for five quarters in a row. It had been expected to make a move into Africa, with Massmart and its bigger South African rival Shoprite seen as potential targets.
Wal-Mart International's chief executive, Doug McMillon, said: "This potential combination with a market leader will enable us to add value to an already successful business through investments in people and technology." He said Wal-Mart would honour pre-existing union relationships.
The company, which has more than 8,500 stores under 55 different names in 15 countries, including 4,000 in the US, reported a record net profit of $3.32bn in the first quarter of this year, driven by strong sales in China, Brazil and Mexico.
Wal-Mart, the world's largest retailer, is planning a major move into the fast-expanding African market, announcing today that it is in talks to buy South Africa's third-largest retailer, Massmart.
The move, which would be worth $4.2bn (£2.65bn), will be overseen by Asda's chairman, Andy Bond, who is responsible for operations in Africa. Wal-Mart is offering 148 rand (£13.40) a share for Massmart, which is nearly 10% higher than its last closing price.
The acquisition would be Africa's biggest deal in more than a decade, and Wal-Mart's largest since it bought the UK supermarket chain Asda in 1999. In May, it agreed to acquire 194 stores in the UK from the Danish discount chain Netto for nearly £800m, although competition regulators are forcing it to sell 25% of the shops.
Bond said: "South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries. South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy."
He said Wal-Mart supported Massmart's black economic empowerment programme and would aim to be a "corporate and retail role model".
Massmart, headquartered in Johannesburg, runs 290 shops, mostly in South Africa, with 24 stores in 12 other African countries including Botswana, Zimbabwe, Tanzania, Nigeria and Ghana. It manages eight wholesale and retail chains under various brand names. The group reported sales of $6.1bn last year.
Syd Vianello, an analyst at Nedcor Securities, said: "It's a big vote of confidence for the South African retail economy and for South Africa."
Wal-Mart is expanding into emerging markets to make up for a slowdown in the US, where like-for-like sales have fallen for five quarters in a row. It had been expected to make a move into Africa, with Massmart and its bigger South African rival Shoprite seen as potential targets.
Wal-Mart International's chief executive, Doug McMillon, said: "This potential combination with a market leader will enable us to add value to an already successful business through investments in people and technology." He said Wal-Mart would honour pre-existing union relationships.
The company, which has more than 8,500 stores under 55 different names in 15 countries, including 4,000 in the US, reported a record net profit of $3.32bn in the first quarter of this year, driven by strong sales in China, Brazil and Mexico.
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