January 30, 2002
TRENDS IN MERGERS AND ACQUISITIONS IN EVOLVING GLOBALIZATION OF INDIAN ECONOMY
Mergers and Acquisitions (M&As) of companies have become fastest growing tools in the growth of global economy. Indian corporate sector in the emerging globalization of country’s economy is not an exception. It is equally affected. During November 2001, 112 M&As worth Rs. 1,735 crore were announced. The Aditya Birla acquisition of stake in L &T alone accounts for 44 per cent of the total consideration of M&As announced.
Ten open offers aggregating Rs. 125.7 crore were announced during November 2001. There was one revised bid and two of the 10 open offers were final exit options to the shareholders prior to de-listing. The de-listing option has become increasingly common, with 7 of the 10 open offers resulting in the de-listing of the companies on successful completion. Acquirers would invoke the de-listing option in over 55 per cent of the cases since April 2001 on the successful completion of the offer.
During April-November 2001, over 35 per cent of the offers were made by the promoters themselves to consolidate their holdings and to de-list the company from the bourses. Over 40 per cent of the total offers announced during the period were made by multinationals, but around half of these offers were for companies already owned by them and aimed at consolidating their holdings. Five of the open offers made by Multi National Corporations (MNCs) were the outcome of global changes in ownership of the overseas parents. In three of these cases, the open offer was forced by the minority shareholders of the company, one offer was ordered by Securities and Exchange Board of India (SEBI) and the remaining one voluntarily made.
In November 2001, only three of the ten offers announced were made by MNCs. Last month, all offers were made by Indian companies.
Foreign acquirers accounted for less than one fourth of all M&As announced during the month. In terms of value, the contribution of these companies to the total M&A consideration of Rs. 1,735 crore was 24 per cent. This is in contrast to earlier months when acquisitions by foreign companies accounted for a major portion of M&As in India. Just two months back, in September 2001, foreign acquirers account for one-third of the total M&As and for around two-fifths of the total consideration of Rs. 1,382 crore.
There are, however, a few sectors in the Indian industry, which continue to be of interest to MNCs. In November 2001, South African Breweris Plc made its fourth acquisition in India, in the past one and a half years. The UK-based company made an open offer for Rochees Breweries to add another 10 million litres of beer manufacturing capacity to its earlier acquired 57.5 million litres capacity.
Following the disinvestment of CMC and HTL in October 2001, which added Rs. 207 crore to the Government treasury, a further some of Rs. 60 crore accrued to the Government through the disinvestment of six hotels of ITDC. The Government was unable to secure bids for two of the remaining hotels targeted in the first tranche of disinvestment of the hotel. Bids for these two which include the Hotel Ashok in Delhi were to be invited in January, 2002.