Reliance Industries likely to buy stake in Welspun Gujarat Stahl Rohren

Metal pipes manufacturer Welspun Gujarat Stahl Rohren Limited, the flagship company of the $1 bn-Welspun Group, may reportedly dilute its stake to Reliance Industries.

Reliance Industries wanted to have control in one of the steel pipe-making companies due to its larger interest in oil and gas where pipe companies have a larger role to play. The company recently has made two new natural gas discoveries in its east coast blocks in the Krishna-Godavari and Mahanadi basins. Moreover, the current global boom in oil and gas and spurt of investments in oil companies has sent pipeline demand skyrocketing across the world.

In December, ABN-AMRO picked up 0.67% stake by acquiring 900,000 equity shares of Welspun at a price of Rs. 93 each.

Meanwhile, Welspun Gujarat Stahl Rohren has earmarked an investment of Rs. 1300 crores funded through a mix of equity, overseas and domestic debt to set up a captive steel plant and plate mill. Its manufacturing facilities are located near Dahej in Gujarat.

In the global markets, Welspun Gujarat supplied pipes to oil and gas majors such as British Gas, Exxon Mobil, Shell and Saudi Aramco and in domestic front, it supplies to Gas Authority of India, Indian Oil, ONGC and Bharat Petroleum.

Read more in the DNA Money article.

Apollo Hospitals to buy UK-based healthcare unit

Apollo Hospitals is looking at acquiring a UK-based hospital chain estimated to be valued upwards of £1.2 bn, in partnership with private equity players. Apollo will provide its management expertise in such deals.

Apollo Hospitals has already expressed an interest in the British unit of Swedish healthcare company Capio that is owned by private equity groups Apax and Nordic Capital. The private equity owners of Capio were considering the sale of Capio’s British unit in response to antitrust concerns.

Apollo has also been looking at other hospitals including The Priory Group, owner of the famous rehabilitation centre for pop stars and fashion models. Priory Healthcare’s major shareholder ABN-AMRO has appointed Morgan Stanley to conduct a strategic review.

Read the Moneycontrol.com and Reuters.co.uk articles.

Investment banking fees in India touch $200 mn from Jan-Feb 2007

Investment banking houses in India have generated a deal fee of around $200 mn in the months of January and February in 2007, as compared to $150 mn for the total year of 2006. Total fees earned during 2006, including equity and debt capital for India, was around $500 mn. Of the $500 million, equity capital markets could have contributed around 60% while around 10% could be the debt capital market fees. The M&A transactions have contributed the remaining $150 mn. Equity and capital market deals entail issuance of shares and bonds by companies to raise money.

For multi-billion deals above $10 bn, advisory fees range from 0.1% to 0.2% of the deal size or anywhere between $10-25 mn. Global i-banks charge a minimum of $1 mn. For small-sized deals, the fee could be around 3.5% of the deal size. With corporates looking at big-ticket deals which require large syndication ability of banks, a commitment fee is also now being levied. This would ensure a minimum payment to i-banks from the deal, even if the corporate eventually loses out in the bidding battle. As deals turn complex, i-banks have also started levying ‘drop dead’ fee or non-refundable fee in case of failed transactions. This is simply to compensate for their time and effort. The bigger chunk of the fee collected by i-banks is garnered from financing and structuring the deal. This fee could range anywhere between 0.50% and 1.25% of the deal size. Fees are higher for equity transactions.

In most of the recently announced deals, European banks have been the lead advisors as Europe has been the destination for the maximum number of acquisitions by Indian corporates. In case of Tata Steel, it was ABN-AMRO, Deutsche Bank and NM Rothschild, while in case of Vodafone and Hindalco, UBS was the sole advisor.

Read more in The Economic Times article.

Suzlon Energy bids $1.3 bn for German company REpower

Suzlon Energy, India’s largest wind power company is in talks to acquire Germany’s REpower. Suzlon has made a public bid of €126 per share for REpower, in a counter-bid to Paris-based nuclear major Areva’s bid of €105 per share. Suzlon’s bid values the deal size at about $1.3 bn.

The bidding process is likely to continue for 4-6 weeks. Suzlon would fund the acquisition through a mix of debt and internal accruals. Areva is the No. 1 maker of nuclear reactors and has offered €105 per share for 70% of the German company. Suzlon’s bid is being made in partnership with Martifer, a unit of Portugal-based Mota-Engil SGPS. Martifer owns a quarter of REpower.

REpower is Germany’s third-largest maker of wind-power equipment after Vestas Wind Systems and Enercon. It reported a 9-month profit of €1 mn compared to a year-earlier loss of €8.3 mn. Martifer has a joint venture with REpower in Portugal. Suzlon and Martifer have signed a legally binding agreement, which sets out the terms for this offer. The offer will be made through BidCo, in which Suzlon holds 75% and Martifer 25% of the capital. Suzlon will finance the offer and Martifer will support it. Suzlon will seek the support of the REpower management along with Martifer for the offer and has claimed a strong interest in working with REpower’s existing management in the future.

Suzlon would retain Hamburg as the headquarters of REpower, and would create 100-200 highly qualified R&D jobs in Germany. REpower has operations in France and elsewhere in Europe, and is planning expansions in China, India and North America. Suzlon Energy is the market leader in Asia and the world’s fifth largest wind turbine manufacturer by annual installations. It is currently on a mega-expansion drive in the international market. It bought Belgium-based Hansen for $565 mn in March 2006. Suzlon is being advised on the acquisition by Yes Bank and ABN-AMRO.

Read the Business Standard and The Economic Times articles.

Tata Consultancy Services to raise funds to hedge forex risk

The Times of India reports that Tata Consultancy Services is planning to raise funds reportedly of around $200 mn to manage risks on its foreign exchange exposure. TCS earns nearly all its income in foreign exchange and volatile exchange rates impact its margins. J P Morgan will be managing the transaction. Citigroup, ABN-AMRO, Standard Chartered and HSBC are in touch with TCS on the same. The exercise is part of TCS’ treasury management as it includes significant forex component. The possibilities include of either going in for a forward contract or a mix of forward contract and options.

Reliance Communications raises India’s largest FCCB issue worth $1bn

Reliance Communications (RCL) has raised $1 bn through foreign currency convertible bonds (FCCBs). This is the largest-ever FCCB issue from India and was oversubscribed 3-4 times by investors from Asia, Europe and the US. The bonds have a maturity of 5 years and would be convertible to equity shares at a 30% premium to the then prevailing market price.

The proceeds from the issue will be utilized to part-finance the company’s $2.5-bn expansion programme. The company has announced the expansion of coverage to 15,000-20,000 new towns and was proposed to be funded through a mix of internal accruals and debt.

JP Morgan and HSBC advised the firm on this FCCB issue. This is the second FCCB offering by RCL within a year. In March 2006, RCL had completed an FCCB issue to raise $500 mn. In December 2006, RCL raised $1 bn in debt from international markets. The five-year unsecured loan was facilitated by ABN-AMRO, Standard Chartered and Citibank.

Read the article in The Economic Times.

Holding company model suggested for BSNL, MTNL merger

A holding company model is being considered by the Department of Telecommunications (DoT) for the merger of public sector telecom companies Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). ICICI Securities, ABN-AMRO, Rothschild, AF Ferguson and Desai & Diwanji were the consultants to the DoT.

The consortium of consultants has suggested that the holding company structure would be a “good immediate-term measure to try and achieve the benefits and synergies of a unified operation of BSNL and MTNL”. A professional management structure, with a board that includes government and industry nominees and employee-participation from of the merged companies, would ensure this model.

Read the article in Business Standard for more comments by the consultants.

BankMuscat buys stake in domestic brokerage Mangal Keshav

Oman’s largest listed company, BankMuscat, is buying 43% stake in brokerage firm Mangal Keshav for an undisclosed sum. This acquisition makes BankMuscat the single-largest investor in the Indian financial services and securities sector from the Sultanate. The financial due diligence on behalf of BankMuscat was done by PriceWaterhouse Coopers India, while the legal due diligence was done by Amarchand Mangaldas. The transaction is expected to be completed in first quarter of 2007.

The Mangal Keshav Group was set up in 1939 and is one of the oldest brokerage houses in India. It is present in securities trading, commodities trading, insurance broking and IPO / mutual fund distribution space. The group is one of the top 20 brokers in the country by market share and is a member of all leading equity and commodity exchanges. It is also a member of the Dubai Gold & Commodities Exchange and has an office in Dubai.

As per Morgan Stanley research, the Indian equity markets is seeing one of the strongest rallies and trading volumes are expected to double to $3.2 trn in 2010 from about $1.6 trn currently. Morgan Stanley projects the Indian brokerage business to grow to $3.9 bn by 2015. Several leading international banks such as Citigroup, BNP, ABN-AMRO, etc. have announced their foray in the securities business in India.

Read the article in Business Standard.

SABMiller may buy Mt Shivalik stake; EV seen at Rs. 300-350 crores

SABMiller Plc, the $14 bn beer giant, may buy a 50% stake or go for a complete buyout of Mt. Shivalik, the largest independent brewer in the country. The deal could carry an EV of Rs. 300-350 crores. Mt. Shivalik’s beer brand, Thunderbolt, has a 6% share of the growing domestic beer market. ABN-AMRO has the mandate from Mt. Shivalik to look for strategic options. Other global players like Carlsberg may also bid for the company.

Mt. Shivalik was recently offered $35-40 mn by Asia Pacific Breweries (APB), a Singapore-based arm of Heineken. Since then, its valuation has soared manifold. SABMiller had also placed a bid for majority stake in Mohan Meakins’ beer business after the promoter family invited business. However, the deal process has been in limbo for a while now. Earlier this year, SABMiller inked $120-million deal to buy the brand rights and beer assets of Foster’s in India giving it an additional 2% share of the domestic consumption.

With the acquisition of Mt. Shivalik, SABMiller can expect to see its market share jump to almost 44%, rather close to that of 45% of United Breweries. The Indian beer market has reported a growth of 25-30% in the current year.

More in The Economic Times article.

Reliance Comm dials banks for Hutch deal

Anil Ambani is leaving no stone unturned to acquire the prized 67% stake of Hutchinson Whampoa in Hutch-Essar. As of latest reports, Reliance Communications has tied exclusivity agreements with a number of foreign banks, presumably, Citibank, HSBC, ABN-AMRO and UBS. This means that not only will these banks provide the necessary debt for the transaction, but the agreements will also prevent them from working with any other prospective or existing bidder. This agreement with the said four banks is crucial, as all have expertise in multi-billion dollar cross-border acquisition financing and their experience would have been of enormous use to rivals. RCL is already in talks with private equity funds such as Kohlberg Kravis Roberts & Co (KKR), Blackstone and Texas Pacific Group for equity financing.

For more, read the following articles The Economic Times, The Financial Express and Business Standard.