This is what the M&A scorecard for 2009 looks like. The most talked about was the Tech Mahindra Satyam deal, triggered by confessions of a financial fraud by Satyam founder B Ramalinga Raju leading to a sale of one of the top five IT outsourcing services companies. Read on for interesting deal nuggets.
RIL-RPL Merger: The $1.67-billion merger between Reliance Industries (RIL) and Reliance Petroleum (RPL) was the largest merger and acquisition (M&A) deal this year. The deal catapulted RIL into the list of the world’s top 50 profitable companies. It also gave the world its largest refining capacity at a single location in Jamnagar. The deal was an old strategy of RIL: To conceptualise and execute a large project in the petrochemical space through a new company, raising debt on the new firm’s balance sheet, and after the initial gestation period, amalgamate it with the parent allowing the latter to hedge the project risk at the time of execution.
Sanofi Buys Indian Vaccine Maker: The acquisition by Sanofi-Pasteur, the vaccine unit of French drug major Sanofi-Aventis, of Indian vaccine maker Shantha Biotechnics for $625 million was the largest inbound deal this year. The deal was done by Sanofi via the acquisition of Merieux Alliance’s subsidiary ShanH, which owns a majority stake in Shantha Biotechnics. The deal continues a trend of overseas drug majors eyeing Indian pharmaceutical firms. Shantha, which supplies vaccines to WHO and other health agencies, is the first Indian company to develop, manufacture and market a recombinant healthcare product in India. The deal gave Sanofi the access to Shantha’s product line and manufacturing capabilities.
TechMahindra Takes Tainted Satyam: The race to acquire Satyam Computers, the fraud-hit IT major, made headlines during the first four months of this year. After the Hyderabad-based firm’s founder B Ramalinga Raju confessed to financial irregularities, the valuation of the firm came crashing down. This attracted a number of IT players and private equity firms, but the deal was a gamble as no one knew the real revenues of Satyam. It was finally snapped up by Tech Mahindra in a deal closely monitored by the government. Tech Mahindra paid $591 million for the firm, making it the largest domestic IT M&A deal.
China’s SAIC Enters Indian Market With GM Deal: The deal between General Motors (GM) and Shanghai Automotive Industry Corporation Group (SAIC) is reflective of the state of world economy. US-based GM, which went bankrupt, sold a 50% stake in its Indian operations for $500 million to China SAIC. While the US is still coming out of the downturn, China (whose growth is led by manufacturing) and India (where growth is led by domestic consumption) are the areas which are witnessing the fastest growth in the world. The JV will launch small cars and utility vehicles in the Indian market.
Suzlon Gets Control of Repower: Suzlon Energy, one of the world’s largest wind turbine manufacturer, was finally able to take complete control of Germany’s REpower in 2009. The company completed buying the remaining 22.5% stake for $498 million from its bidding partner Martifier, a unit of Portugal’s largest builder Mota Engil. Suzlon Energy Ltd had finally won the deal to acquire the German wind power company for €1.35-billion, bidding against the likes of Areva, back in 2007. Suzlon had also acquired Belgium-based Hansen, a leading wind turbine gearbox manufacturer, for $645 million. But the firm is now suffering from a deal hangover, and has undertaken a broad-based debt consolidation and refinancing scheme aggregating to $3.1 billion in value.