Merger and acquisition activity in India perked up this year thanks to a few multi-billion-dollar deals that companies struck either to slash debt or consolidate their market share.
Although the number of M&A deals fell a tad to 963 this year from 996 last year, the cumulative announced value of M&A transactions jumped, according to provisional data from VCCEdge, the research platform of News Corp VCCircle.
Dealmaking has continued in the last fortnight of the year with Claris Lifesciences agreeing to sell its injectables unit to Baxter International for $625 million and state-run Oil and Natural Gas Corp deciding to purchase Gujarat State Petroleum Corp’s gas assets off India’s east coast for $1.2 billion.
The biggest deal of the year came in the energy sector and involved Russian giant Rosneft. The other top deals involved domestic players in sectors such as financial services, telecom and cement.
Here is a summary of the top deals of 2016:
Rosneft and Essar
Russian state energy giant Rosneft along with others struck a $12.9 billion deal with India’s second-biggest private oil firm, Essar Oil, in a transaction that involves the largest inflow of foreign direct investment into the country.
Rosneft bought a 49% stake in Essar Oil’s refinery, port and petrol pumps while the Netherlands-based Trafigura Group Pte, one of the world’s biggest commodity trading companies, and Russian investment fund United Capital Partners split another 49% equity equally.
The deal will give Rosneft access to Essar’s fuel retailing network of 2,700 fuel pumps. It factors in Essar Oil’s debt of about $4.5 billion and about $2 billion debt with the port company.
HDFC Life and Max Financial
Analjit Singh-promoted Max Financial Services Ltd and mortgage lender Housing Development Finance Corporation have proposed to merge their life insurance businesses to create the largest private-sector life insurer in the country.
KKR-backed Max Financial, the listed holding firm for Max Life, would hive off the non-insurance business into Max India. The proposed transaction creates a company with annual premium of Rs 25,500 crore and will have a differentiated portfolio and wider reach to expand in a growing life insurance sector. The merged company will be listed on the stock exchange wherein HDFC Life will hold a 69% stake while Max Life will hold the remaining.
Currently, India's life insurance sector is dominated by state-run Life Insurance Corp. SBI Life, a joint venture of State Bank of India and BNP Paribas, and ICICI Prudential Life Insurance are the top two private-sector life insurers by premium income with HDFC Life ranked third.
"We expect more activity in the insurance sector in 2017, with subsidiary-level M&As and private placements by financial services conglomerates as a trend to watch out for,” said Sumit Jalan, managing director and co-head of investment banking and capital markets for Credit Suisse in India.
Aircel and Reliance Communication
In the biggest consolidation deal in India's telecom sector, Reliance Communications and Aircel announced the merger of their wireless operations to create a combined entity with assets worth Rs 65,000 crore.
RCom and Maxis Communications Berhad will hold 50% each of the merged entity with equal representation on the board and committees. The transaction will reduce RCom's debt by Rs 20,000 crore while Aircel's debt will fall by Rs 4,000 crore on closing in 2017.
The merger will create India's fourth-largest telecom operator by customer base and revenues. The merged entity will have the second-largest spectrum holding among all operators.
Jaiprakash Associates and UltraTech Cement
Jaiprakash Associates Ltd closed a deal to sell nearly two-thirds of its cement business to UltraTech Cement Ltd. The transaction gives debt-laden Jaiprakash a breather in its attempt to stave off creditors seeking to take over the company.
The deal was valued at Rs 16,189 crore ($2.4 billion) including debt. UltraTech will also spend Rs 470 crore to complete an under-construction grinding unit. The deal will help UltraTech, the single-largest cement firm in the country in terms of capacity, to again overtake its Swiss construction materials rival LafargeHolcim, which controls Ambuja Cements and ACC in the country.
Lafarge and Nirma
Ahmedabad-based cement player Nirma Ltd trumped the bigger boys of India Inc including billioniare Ajay Piramal and Sajjan Jindal-led JSW Cement to lap up Lafarge India for an enterprise value of about $1.4 billion (Rs 9,400 crore) including debt.
The deal will complete the India leg of the global merger of French cement giant Lafarge and Swiss building materials group Holcim. The transaction is part of LafargeHolcim’s 3.5 billion Swiss franc ($3.6 billion) divestment programme and is essential for completing the merger announced last year.
LafargeHolcim had been trying to sell Lafarge India for the past year after the Competition Commission of India, in April 2015, asked the company to divest some assets to complete the merger.
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