India lost $27 billion worth deals in soured mergers
Date: Thursday , September 30, 2010
Mergers and acquisition had a major role in the post recession economy. But the Indian economy has also seen some major fall off in terms of mergers. Merger deals worth $27 billion have soured so far this year in India. According to the data compiled by research firm VCC Edge, as many as nine deals have been called off this far in 2010.
The biggest non-starter was that of Mukesh Ambani-led Reliance Industries'(RIL) $14.5 billion bid for LyondellBasell. This was followed - in terms of deal value - by the cancellation of his younger brother Anil Ambani run Reliance Communications' $10.8 billion merger deal with GTL Infra."The failure of the mega deals was primarily due to valuation concern. Management control issues and strategic unsuitability of the deals was another reason for cancellations", says SMC Capitals Equity Head, Jagannathan Thunuguntla.
Interestingly, the Ambani brothers, who have been most active in merger and acquisition activity this year, accounted for over $25 billion of the deals in 2010 that could not take off in 2010.
Mukesh Ambani led RIL, last month, had made foray in the hospitality sector by picking up a 14.18 stake in EIH Ltd, promoted by Oberoi group of hotels and resorts. However, early in the year, EIH also witnessed a deal cancellation of $272 million in which Max Hospital's founder and chairman Analjit Singh was interested in 17 per cent stake in the hospitality major.
Another significant deal that did not work was Singapore's GIC Special Investments' $84.7 million bid for 6.58 per cent stake in Fortis Healthcare. Naveen Jindal led Jindal Steel and Power (JSPL) was also denied a stake in Zimbabwe Iron & Steel, estimated to be in the range of $600 million- $1 billion by the government, as it did not approve of selling the ailing company to large corporates.
Other transactions that turned sour so far this year include – U.S. based Scripps Networks Interactive’s attempt to buy stake in NDTV Lifestyle, drug major Abott Laboratories' interest in Wockhardt, multiplex chain PVR Cinemas' bid for DT Cinemas and Ingersoll Rand USA's attempt to merge the Indian subsidiary into itself.