from India Insight:
Third time’s the charm for Mukesh Ambani
(UPDATE: Reliance Industries has gained an overseas foothold by agreeing to pay $1.7 billion to form a joint venture with U.S.-based Atlas Energy. India's largest-listed firm will pick up a 40 percent stake in Atlas's operations in the booming Marcellus Shale)
The ruthless efficiency and smooth execution that marked Reliance Industries' development of the world’s largest refining complex in western India and its vast gas fields off the country's east coast has eluded the top-listed Indian firm during its recent attempts at overseas takeovers.
Nevertheless, Mukesh Ambani, the world’s fourth-wealthiest man and the chairman of Reliance, is known for his doggedness and is unlikely to backpedal on his overseas ambitions after being rebuffed by two overseas firms -- bankrupt petrochemicals maker LyondellBasell and oil sands firm Value Creation.
A source tells us that Ambani now has his eyes set on the booming Marcellus Shale in the eastern United States, and wants to form a joint venture with Atlas Energy to develop the independent U.S. oil and gas firm’s operations in the gas project.
A deal could bring in more than $1 billion for Atlas, which will be a much smaller price than what Reliance was willing to pay for LyondellBasell, which was valued at about $14.5 billion by the Indian firm’s final offer. Lyondell rejected it saying the price was not high enough.
Analysts thought the exact opposite. They worried Reliance was overpaying for Lyondell, and were flummoxed about what synergies the company hoped to achieve by buying a bankrupt petrochemicals maker. In fact, investors in Reliance heaved a sigh of relief when the deal was called off.
Ambani seemed to have won even in defeat.
Keeping score: BRIC flotations
Initial public offerings (IPOs) of companies from the so-called BRIC nations — Brazil, Russia, India and China — enjoyed their best-ever start to the year, according to Thomson Reuters data:
• BRIC IPO volumes for the beginning of 2010 are at their largest level, in terms of both value and number of issues, for any January on record.
• Asian IPO issuance for January 2010 to date has reached a similar record, in terms of value, being the largest January on record.
• BRIC IPOs account for 76% of total global IPO activity for the year so far. This is up from 5.6% in January 2009.
• Materials tops the industry breakdown this month with 35% of the activity. Energy & Power and High Technology come 2nd & 3rd respectively.
• China issuance accounted for 67% of the activity for January 2010 to date
• The largest BRIC issue so far this year was United Company Rusal’s US$2.2bln IPO. BNP Paribas, Credit Suisse, Bank of America Merrill Lynch, BOC International (China), Nomura Securities, Renaissance Capital, VTB Capital, and Sberbank are all bookrunners for the deal.
Reliance aims big with $12 bln bid for LyondellBasell
Ranked by Forbes as India’s richest man with a net worth of $32 billion, Mukesh Ambani is no stranger to taking risks.
The move by conglomerate Reliance Industries, controlled by Ambani, to bid for bankrupt LyondellBasell is a calculated one. Markets seem to think this is a bargain and investors pushed up Reliance’s stock nearly 4 percent on Monday.
If the deal, which sources say may be worth $12 billion, goes through, it would catapult Reliance into the ranks of top petrochemical makers such as Saudi Arabia’s SABIC, Germany’s BASF and Dow Chemical Co.
The bid comes at a time when asset prices have fallen globally in the wake of the economic crisis but there are still some lingering doubts over whether the worst is over for the global economy.
Reliance hasn’t shied away from making mega investments during downturns.
Last December, Reliance commissioned a 580,000 barrels per day refinery next to its existing 660,00 bpd plant in the western Indian state of Gujarat, creating the world’s biggest oil refining complex just as global oil demand began to collapse.
Reliance has a cash pile of $4 billion and $8 billion in treasury stock that can be sold, so funding is unlikely to be an issue for the company, Macquarie said in a research note ahead of the bid. Bank of America Merrill Lynch is among the advisers for Reliance, sources said.
Poor? Some chocolate?
If they don’t have bread, will they eat chocolates?
Cadbury’s hold on emerging markets such as India is part of the reason why Kraft wants the company so much, the Wall Street Journal said.
The paper points out that Cadbury estimates more than half of India’s more than 1 billion people have never tasted chocolate, providing an opportunity for growth.
That’s a big number, but not necessarily a huge market.
India measures poverty line in terms of daily calorie intake — 2,400 calories for folks living in rural areas and 2,100 for those living in cities. On that basis, the government estimates 27.5 percent of Indians lived below the poverty line in 2004-05. The measure might be conservative. As this New York Times report points out some say the number is at least 50 percent, and the actual caloric intake of the poorest 25 percent just 1,624 calories.
The World Bank has set a poverty line at $1.25 per day. Under that measure, 42 percent of India’s population, or 456 million people, lived below the poverty line in 2005.
A 200 gram Dairy Milk bar has more than 1,000 calories, and it costs about 250 rupees, which is roughly $5.
The fact that chocolate hasn’t proven to be popular in India undoubtedly has something to do with the economics (most rational people wouldn’t pay $5 for 200g of chocolate) but climate is also a factor- it simply isn’t convenient.
from Summit Notebook:
Expect action in Japanese M&A
After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.
There won't be a flood of deals, Recof President Hikari Imai says, but the ones there are, are likely to be chunky as Japanese companies expand their frontiers beyond domestic markets where growth prospects are limited.
Geographically the focus is likely to be Asia -- China, India in particular and possibly the Philippines or Australia. And the types of companies looking abroad will broaden as well, Imai told the Reuters Japan Investment Summit.
Recof expects Japanese power utilities, paper, food and beverage and retailing firms to look abroad at markets where they can put their advanced technology and inventory control systems to use.
The sort of companies that up till now have been focused on their home base. Driving all of this will be expectations of lack of growth in Japan's own markets as it climbs slowly out of recession and its population ages -- and saturation domestically.
So Imai reckons yen strength and the big drop in stock markets everywhere mean it may be an opportune moment for companies with overseas ambitions.
Another deal in healthcare: what’s the magic pill?
As dealmakers everywhere struggle to get deals done, the healthcare industry seals yet another one.
Express Scripts has agreed to buy health insurer WellPoint’s prescription business for $4.68 billion in a significant expansion for the U.S. pharmacy beenfit manager. The deal will be a concoction of cash and up to $1.4 billion in common stock, and will generate more than $1 billion of incremental EBITDA.
This comes on the heels of Pfizer’s $68 billion acquisition of Wyeth, Merck’s $41.1 billion takeover of Schering Plough and Roche Holding’s $46.8 billion buyout of Genentech. Granted, this isn’t a pharma deal, but it still falls under the umbrella of the healthcare sector.
And in a market where deals aren’t getting done — mainly due to tight credit conditions and partly due to value gaps between buyers and sellers (due to the huge declines in stocks late last year) — you’ve gotta ask: what’s the magic pill?
Deals of the day:
* Indian mid-sized IT outsourcer Tech Mahindra won a bidding auction for a majority stake in fraud-hit Satyam Computer Services Ltd, edging out Larsen & Toubro, seen by some analysts as the favourite bidder. * India’s Larsen & Toubro, which has built up a 12 percent stake in Satyam Computer Services, plans to hold on to the stake, its chief financial officer said on television channel NDTV Profit. * Pakistan’s Habib Bank Ltd. (HBL) and MCB Bank are interested in buying the operations of Royal Bank of Scotland (RBS) in the South Asian nation, the two banks said in separate statements on Monday. * A bid by Japan’s Mitsubishi Rayon Co for unlisted British chemicals maker Lucite International has hit a hurdle in China where regulators have delayed the acquisition, two sources briefed on the matter said.
* Orascom Telecom said on Monday it was proposing to extend the deadline to April 15 for implementing a court order for the Egyptian firm to sell its shares in mobile firm Mobinil to France Telecom.
from India Insight:
Satyam — truth be damned?
If a stock dives 55 percent, is it time to go bargain hunting?
Absolutely not! At least that was the case with India's Satyam Computer Services after it shocked investors on Wednesday by disclosing most of its profits were cooked up.
The disclosure came after the company's botched attempt last month to buy two construction firms partly owned by its founders, which sent its shares diving 55 percent in one session by angry investors.
Chairman Ramalinga Raju said: "It was like riding a tiger, not knowing how to get off without being eaten."
The shares tumbled nearly 80 percent, roiling investor confidence in India and bringing an undignified end to the illustrious career of one of the country’s top businessmen.
The accounting fraud which analysts instantly dubbed as "India's Enron", battered confidence in Indian companies and cast a shadow on the once-booming outsourcing industry.
The biggest Indian corporate scandal in memory threatens future foreign investment flows into Asia's third-largest economy, already facing slowdown pangs.
Satyam was,is and will remain one of the TOP company no matter what happens .The SPIRIT OF SATYAM is very high, all the EMPLOYEES AND LEADERS are united and stand by Satyam and will do their BEST to come out of it.
ALL THE BEST FOR SATYAM 
Tata’s likely infusion into Jag, Rover, bad news for sellers
Tata Motors, which bought Jaguar and Land Rover from Ford earlier this year, may now have to pump at least $1 billion into the brands to keep them alive. That’s bad news for U.S. automakers trying to sell brands.
While auto assets up for sale by U.S. automakers were expected to linger for a while, Tata’s rough road with Jag and Land Rover are likely to keep those assets on the block for much longer.
Tata has agreed to inject “tens of millions” of pounds into the company to tide it over while the government mulls a bailout, media reports have said. This is in addition to “hundreds of millions” of working capital provided since Tata bought Jaguar Land Rover from Ford in March.
That’s a lot of cash for any automaker. And it’s a lot of cash for an Indian automaker, which makes most of its profit in Indian rupees.
And that’s bad news for U.S. automakers hoping to lure buyers — some from emerging markets — for various assets. As Detroit’s three surviving automakers seek interest for Volvo, Saab, Viper and Hummer, the most likely buyers are Asian automakers. But Tata has its hands full with the two brands it bought from Ford. And Mahindra & Mahindra, another Indian contender, is bound to be discouraged by Tata’s experience. Investment bankers have said that Chinese automakers were waiting on the sidelines to see how the Tata experience works out.
Hummer and Viper have both been on the block for a few months in auctions that have gone on a lot longer than anyone had anticipated.
Part of the problem is that the finacing markets are bad and it’s tough to get a deal done. But another part of the problem — and a larger one perhaps — is that no one is really interested in buying a U.S. auto asset right now.
Tata Motors Ltd is a multinational corporation headquartered in Mumbai, India. Part of the Tata Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company). Tata Motors has a consolidated revenue of USD 16 billion after the acquisition of British automotive brands Jaguar and Land Rover in 2008.
Cheap New Auto
from India Insight:
It’s “all in the family” for Indian tech firm
Hold on to cash and don't jump in to help family-owned firms.
Satyam Computer Services got this stern message this week when it was forced to dump a plan to spend $1.6 billion to buy two builders, part-owned by Satyam's chairman and other insiders.
Ramalinga Raju, chairman, Satyam Computer Services is seen in his office in Hyderabad in this undated handout photograph. REUTERS/Handout
The move sent shockwaves across a country known for its trailblazing software industry, and triggered a cloud over corporate governance in India.
"All in the Family," screamed the Economic Times on its front page, highlighting a furious reaction from the investment community.
Satyam's move to buy control of Maytas Properties and Maytas Infrastructure was killed just 12 hours after it was announced.
