JP Morgan to form asset reconstruction business with Yes Bank, Bank of Baroda, Bank of India and Union Bank

JP Morgan is setting up an asset reconstruction company in India along with public sector banks Bank of India, Bank of Baroda, Union Bank of India and private sector bank Yes Bank. The group has applied to the Reserve Bank of India (RBI) for its approval. JP Morgan will act as the knowledge partner in the joint venture, which will have an initial capital of Rs. 100 crores. If and when the RBI’s approval is received, the four India banks will form a company in which JP Morgan will pick up a 27% equity stake. For this, it will have to get the permission of the Foreign Investment Promotion Board, since the investment will be treated as foreign direct investment. At present, the cap on FDI in asset reconstruction companies is at 49%.

Union Bank was earlier supposed to partner Standard Chartered Bank in the latter’s ARC set-up. However, due to delays, Union Bank has now switched over to the JP Morgan side of the business.

Read more in the Business Standard article.
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JP Morgan to set up asset reconstruction business in India

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.

Actis hikes open offer for Phoenix Lamps to Rs. 190

Business Standard reports that PE fund Actis has decided to increase the open offer price for Phoenix Lamps by 25% to Rs. 190 a share, following a directive by the Securities and Exchange Board of India (SEBI). The revised open will open on February 5 and close on February 24.

The mandatory 20% open offer was triggered after Actis bought the entire 37% stake in Phoenix Lamps from its promoters, the Gupta family, last year. The open offer was priced at Rs. 152 a share and was supposed to open on August 31 and close on September 19. Yes Bank was the adviser to Actis for the offer. Actis had agreed to pay Rs. 190 a share to the Guptas, 25% higher than the price of the open offer on account of non-compete fees. However, market regulator SEBI did not agree to this argument. Actis will now make the open offer at Rs. 190 to buy the shares of the remaining shareholders.

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SEBI asks Actis to pay Phoenix Lamps’ minority shareholders same price as paid to promoters

Catholic Syrian to sell 15% stake to AIF Capital Development; seeks RBI nod for sale

Kerala-based Catholic Syrian Bank is in the process of selling a 15% stake to AIF Capital Development, a Mauritius-registered private equity firm. It is seeking the Reserve Bank of India’s (RBI) permission for the same. The RBI’s policy on shareholding in private sector banks allows any single entity to own a maximum of 10% stake in a bank. Catholic Syrian Bank hopes to get clearance from the RBI to have a single shareholder owning more than 10% stake as has been allowed in Yes Bank (Rabobank – 19.29%) and Centurion Bank of Punjab (BankMuscat – 17.76%). AIF Capital Development has already obtained clearance from the Foreign Investment Promotion Board (FIPB). The government’s guidelines allow up to 74% foreign ownership in banks.

The bank plans to make a preferential allotment to AIF Capital to fulfill the central bank’s requirement that every private sector bank must have a minimum net worth of Rs. 300 crores. The bank had a net worth of Rs. 215.58 crores as on March 31, 2006. The Kerala-based bank has a network of 334 branches and extension counters, which include 5 NRI branches, 5 SSI branches, 5 industrial finance branches and 4 service branches.

Read the Business Standard article.

Yes Bank gets Rs. 120 crores from Swiss Re

Leading global re-insurer, the Zurich-based Swiss Reinsurance Company (Swiss Re) has bought a 3.57% strategic stake in the domestic private sector Yes Bank. Swiss Re has provided an equity infusion of Rs. 120 crores ($26.5 mn) by way of private placement. The paid-up share capital of the bank has now increased to Rs. 280 crores and the total capital base, including Tier-I & Tier-II capital, has now crossed the Rs. 1,000-crore mark.

Post- issue, the promoters’ holding will come down to 37.2% from 38.6%. Rabobank’s stake will fall to 19.3% from 20% and the holding of private equity investors including Citicorp International, Russell AIF and ChrysCapital to 17.9% from 18.5%.

Yes Bank plans to raise $150 mn of capital by March 2007.

For more, read the following Business Standard article.