Project on Idbi Capital Market Service - PowerPoint


        14:00/15:15- Panel 2

Mergers & Acquisitions between
       India and Europe
                 14:00/15:15- Panel 2

      Mergers & Acquisitions between
             India and Europe
Chairperson: R. SANKARAN, Advisor,
             Rothschild India
   Sanjay BHANDARKAR, Managing Director,
    N M Rothschild & Sons (India)
   Kalpesh KIKANI, Senior General Manager,
    ICICI Bank
   Tim THOMAS, Chief Operating Officer,
    Bharti AXA Life Insurance Co.

India – Europe Connexion

      Managing Director
 N M Rothschild & Sons (India)

India – An Overview
   GDP Growth rate amongst the highest
    in the world
        Clocked at 8.4% last year and estimated
         c.9 % for the current year
        5th largest nation in the world in PPP
         terms (€ 3tn)*
        Per Capita GDP (PPP) : € 2,720*
        Growth spurt led by manufacturing and
         service sectors
        Highest FII inflow amongst emerging
         Asian economies in CY06 (€ 6.2bn)
        FDI Inflows at € 5.5bn in FY 06 (40%
         YoY growth)
        Among the four fastest developing BRIC
         economies in the world
        Population of over 1bn with 54% less
         than 25 years old
              Note * - As of 2006 est

India – Developed Capital Market
                                                                             Capital markets
   Has one of the most developed capital
    markets among emerging countries
        Only BRIC country with Market Cap.
         higher than GDP
   115 companies with a Market Cap.
    greater than €1bn (As of 15th May 2007)
   Substantial PE interest
   Indian corporates have made                      Source Rothschild analysis
                                                     Note Indices rebased to 100
    aggressive cross-border acquisitions
    backed by                                                          Foreign attractiveness

        Funding from investors, hedge funds and
   Government pursuing progressive
    liberalization and easing of FDI norms
        100% FDI allowed in most infrastructure

                                                   Source A T Kearney Study 2005

Indian Companies Going Abroad
   “The Indian Multinational”
        A steel company in UK, an oil & gas
         explorer in Norway, a generic drug
         manufacturer in Germany; all have
         one thing in common - they are all
         flying the Indian tricolor
   Value of outbound deals larger than
        In Jan-March 2007, 40 out-bound
         deals with a total value of € 15bn
        Led by Tata-Corus, Hindalco-
         Novelis, Aban-Sinvest
   Companies looking to expand their
    product portfolio, access new
    markets, technologies
        From regional to global player

Indian Acquirers – European Targets
   Indian companies on a massive
    acquisition spree in past 2 years
        Led by Iron and Steel, Energy and
         Pharmaceutical sectors

   More outbound deals than inbound
    deals in 2006 in value terms
        Largest portion of outbound
         acquisitions in Europe (42%) followed
         by North America (24%)

   Tata – Corus deal represents largest
    ever acquisition by an Indian

                                                 Source: Thomson Financial
                                                 Note:1) 2007 figures are YTD
                                                     2) All completed Deals only

Indian Acquirers – European Targets
                                                                              Sectoral Split
   Iron & Steel
        Tata’s € 9.5bn acquisition of Corus
         Group PLC
   Energy
        Aban Offshore’s € 1.1bn acquisition of
         Sinvest ASA, an oil & gas E&P company
        Suzlon Energy is currently in the process
         of acquiring German based REpower
              Has placed a competitive bid of € 710m

   Pharma & Biotech
        Dr. Reddy’s € 577m acquisition of
         German pharma major betapharm GmbH
        Ranbaxy Laboratories acquired
                                                        Source: Merger Market, Rothschild analysis
         Romanian based Terapia SA for € 270m           Note:1) Includes all announced deals from 2004 till 2007 YTD
                                                            2) Excludes Tata – Corus deal

Indian Acquirers – European Targets
                                         Top 10 Deals (2005 – 2007YTD)

 Source: SDC, Merger Market, Rothschild analysis

European Acquirers – Indian Targets

   European investment in India
    constantly on the rise
        Majority of inbound investments seen
         in Telecom, IT and Financial Services

   Vodafone’s recent acquisition of
    Hutch’s 67% stake in Hutchison Essar
        Largest ever acquisition by a foreign
         company in India

                                                 Source: Thomson Financial
                                                 Note:1) 2007 figures are YTD
                                                     2) All completed Deals only

European Acquirers – Indian Targets
                                                                           Sectoral Split
   Telecom
        Vodafone’s € 10.5bn announced
         acquisition of Hutch’s 67% stake in
         Hutchison Essar
        In 2005, Vodafone also picked up 6%
         stake in Bharti Airtel for € 686m
   Mining
        UK based Vedanta Resources’ recent
         announced acquisition of 71% stake in
         Sesa Goa for € 972m
   Cement
        Swiss cement major, Holcim picked up
         20% stake in Gujarat Ambuja Cement for
         € 466m
                                                  Source: Merger Market, Rothschild analysis
                                                  Note:1) Includes all announced deals from 2004 till 2007 YTD
                                                      2) Excludes Vodafone – Hutchison Essar deal

European Acquirers – Indian Targets
                                           Top 10 Deals (2005 – 2007YTD)

 Source: SDC, Merger Market, Rothschild analysis
 Note *- Through its Indian Subsidiary, Mysore Breweries

In Conclusion
Cross border activity on a continuous rise
   Number of cross border deals increased from 60 in 2004 to 266 in 2006
        A significant proportion of M&A activity (in terms of volume) was done by mid cap
   Number of Indian companies that are able to do major acquisitions abroad
    is growing constantly
        In the first few months of 2007, Indian M&A crossed € 26bn led by large cap
         companies like Tata, Suzlon, Hindalco (Birla group)
   Easy availability of debt for acquisition financing
   Inbound acquisitions constrained by limited availability of high quality

Rothschild India Office
   Advised Tata Steel on € 9.3bn                  Tata Steel             Dr. Reddy s Laboratories         Azure Solutions

    acquisition of Corus Group
                                                                          Advised on the US$576m          Advised controlling

    Advised Dr Reddy’s € 577m acquisition                                 acquisition of Betapharm,    shareholders on their US$
                                             Advised on US$ 11.9bn                Germany                 140m disposal of
                                                                                                         shareholding to Subex
                                             acquisition of Corus Group
                                                                                                        Systems through a GDR
    of betapharm                                          plc

                                                       2007                         2006

   Advised Azure on € 113m sale to Subex
    Systems                                       ICICI, IDBI, SBI            ICICI IDBI EXIM                 Air Deccan

   € 1.4bn Dabhol power project
                                                                          Advised Indian Lenders to

   Daewoo automobile plant in India           US$1.9bn disposal of       Daewoo Motors (India) on      Raising US$40m private
                                              assets of Dabhol Power      the monetisation of assets   equity from ICICI Ventures
                                             Company to Ratnagiri Gas                                   and Capital International
                                               & Power Pvt Ltd (a JV
                                             between NTPC and GAIL)
   Air Deccan, first Indian LCC                        2005                        2005                         2005

   Radio Mirchi, first private FM channel
                                                  Entertainment                   Foodland                   Lanco Group
                                                  Network (I) Ltd.
   Radha Krishna Foodland, first food
    distribution deal                        Financial Adviser on fund     US$25m private equity         Advised on induction of
                                                       raising             infusion from Warburg        financial partners in 600
                                                                                   Pincus                   MW coal based

   Lanco Amarkantak power project, first                                                              Amarkantak Power Project

    coal based IPP in India                            2002                         2004                         2006

        14:00/15:15- Panel 2

Mergers & Acquisitions between
       India and Europe

India-Europe M&A

  Kalpesh KIKANI
Senior General Manager
       ICICI Bank


  M&A activity in India

  Trends in Indian outbound M&A

  Considerations in European deals
Increased corporate activity

   Indian corporates aspiring to become market leaders in their
    business segments not only in India but also globally
   Growth drivers
      Strong  growth in demand leading to increased utilisation of
       existing capacity
      Product   portfolio and service offering enhancement
      Access    to new technology and markets
      Derisking   the business

          …aided by easier access to capital supply…

Increased access to capital
           Private Equity                           Domestic Public issue

          ADR/ GDR issue                              ECB/ FCCB issue

          …reflecting in the sharp increase in M&A activity in
          the recent past…

M&A activity in India

                                                                                                               Share of India in global market
  USD billion

                                                                                         * 2007 figure is estimated
                                                                                         Source : Bloomberg

                •   Value of Indian deals grew at a CAGR of 140 % from USD 8.3 bn in CY04 to
                    USD 47.4 bn in CY06
                     • ICICI Bank was involved in USD 16.5 billion worth of deals in CY06
                •   Outbound M&A deals till March was USD 8.8 billion in 2007
                     •   Estimated total outbound M&A projected to be more than USD 35.0 bn in 2007
                •   This appears to be just the beginning of the M&A wave in India
India-Europe M&A

    •   Europe represents the region with the largest number of acquisitions from

    •   India’s share of outbound deals originating from Western Europe has
        increased from 5.0% to 8.5% between CY04 and CY06
         •   In value terms it has increased from USD 0.7 billion (CY04) to USD 3.1 billion

  M&A activity in India

  Trends in Indian outbound M&A

  Considerations in European deals

Explosive growth
   India's M&A has grown by 150%, next only to France and Hong Kong, each of
    which achieved more than 200% growth
       More than 80% of large Indian companies are exploring the M&A option to
   India is second largest investor in the UK, with investments of around USD 2.0
    billion (2005 - 2006)
   Notable Deals in Europe
       Aban Offshore acquires Sinvest, Norway for USD 1.3 billion (2007)
       Tata Steel acquires Corus for USD 12.8 billion (2006)
       Ranbaxy acquires Terapia for USD 324.0 million
       Suzlon acquires Hansen, Belgium for USD 565.0 million (2006)
       Dr Reddy's Lab. acquires Betapharm for Euro 480.0 million (2006)
       Reliance acquires Flag Telecom for USD 207.0 million (2003)
       Tata Tea acquires Tetley Tea for USD 430.0 million (2000)

Increasing leverage
                              Target Debt/EBITDA levels in Western Europe


        Total Debt on target/EBITDA levels increased from 4.93 (2005)
         to 5.28 (2006)
        Senior Debt/EBITDA levels also increased from 3.92 (2005) to
         4.21 (2006)

Pricing Trends (W Europe)

         Downward trend in Average Margins
         Average Margins in 2006 : 238 bps (247 bps in 2005)

                      Source : LoanConnector


  M&A activity in India

  Trends in Indian outbound M&A

  Considerations in European deals

Key considerations in deal structuring

   From a lender’s perspective
      Key challenge is to get direct access to cashflows/assets of target
       (based in Europe)
      Regulations differ across countries in Europe
          UK has a whitewash procedure
          Such is not available in other geographies

Financial Assistance in Europe

Country         Belgium         France     Germany           Italy      Netherlands         Spain

Assistance    No              No         No             No            No               No

              Very limited,   None       None for AG    None          None for NV or   None
              none                       &              relevant      subsidiaries     relevant
Exceptions?   relevant                   subsidiaries
                                                                      BV can give
              Refinancing                Other          Merger with   loans up to
              may be OK if               common         target may    distributable
              entirely                   forms of       be allowed    reserves
              separate                   entity (e.g.
                                         GmbH) not

Key messages

   Indian clients are increasingly looking at acquisitions for growth
   The confidence level has increased and these companies are not
    shying away from acquisitions of much larger companies
   Requirements of Indian clients are not necessarily same as for
    corporates in other geographies
       Hence, solutions need to be tailored for Indian requirements
   All key decision makers in ICICI Bank are based in Mumbai, thereby
    enabling quicker turn around in case of last minute changes in
    structure/ quantum of financing
   ICICI Bank knows the people who are driving the acquisitions in India
    and thus in critical situations has the ability to look beyond numbers

Recent Transactions

                                                                                       Acquisition of
       Acquisition of         Acquisition of 30% stake      Acquisition of
                               in Energy Brands Inc.                                 Thomson SA’s CPT
        Pinewood                                         West Asia Drilling N.V.
                                  USD 712 million
      USD 118 million                                        USD 33 million           USD 283 million
                               Structuring and Lead
  Sole advisor and arranger                              Structuring & Financing   Structuring & financing

       Acquisition of           Acquisition Hansen           Acquisition of            Acquisition of
      Carbogen Amcis              Technologies              Amann Holdings             Sinvest A.S.A

       USD 75 million             USD 565 million            Euro 35 million
                                                                                      USD 800 million

   Structuring & Financing         Structuring &             Lead Arranger
                                     Financing                                     Structuring & Financing

Recent Transactions

                                                          Acquisition of 20.2%
   Acquisition of spirits        Acquisition of           stake in Great Lakes       Acquisition of
       business of                Typhoo Tea
      Shaw Wallace                                            Carbon, US             Keyline Brands

                                 GBP 80 million                                      GBP 18 million
     USD 300 million                                        USD 101 million
                            Sole advisor and arranger
         Advisor                                        Sole advisor and arranger     Sole Arranger

   Employee buyout of                                   Acquisition of Tashkent      Acquisition of a
                               Acquisition of DCS
   Tata Tea plantations                                                             South African tyre
                                   Software                Toytepa Textiles
      USD 13 million                                        USD 103 million
                                 GBP 12 million
                                                                                     USD 62 million
                                 Sole Arranger          Structuring & Financing
                                                                                    Guarantee facility

Thank You

        14:00/15:15- Panel 2

Mergers & Acquisitions between
       India and Europe

Indian Market Entry Experience

           Tim Thomas
      Chief Operating Officer
         Bharti AXA Life

         Wednesday, May 16, 2007
      1.0 Market entry - a phased approach
    Phase 1                      Phase 2                Phase 3                        Phase 4                 Phase 5
Desk top analysis       Strategy & business case    Partner selection        JV execution and operational   Implementation
  Apr-Jul 2004                Aug-Dec 2004                                                                                   Launch
                                                       & planning                       design
                                                     Jan-May 2005                   Sep 05-Mar 06           Oct ‘05-Aug 06   Aug ‘06

  • Establish the           • Strategy              • Establish a              • Finalise partner            • Pre- launch
    viability of              formulation for         project team on the        negotiations, JV              and the 'start-
    commencing a              market entry into       ground in India,           structuring and               up' phase
    project to detail         India and detailed      consisting of AXA          preparation of                preparation
    India market              business case           secondee, advance          legal agreements            • Regulatory
    entry                     examining viable        hire, implementation     • Detailed                      license
  • Confirm scope,            entry options           partners and               operational design            approvals
    plan, and               • Assess critical         external resources         (partner specific)          • Launch comms
    deliverables              success factors       • Finalise partner         • Marketing plan              • Manpower
  • Draft critical            for entry options       selection for            • Implementation                recruitment
    success factors         • Evaluate potential      Management Board           planning covers:            • Sales force
  • Agree project             partners interest       endorsement                process, systems,
                                                    • Develop regulatory                                       training,
    governance                and suitability and                                infrastructure and            compensation
                              define preferred        relations                  back office, branch
  • Desk top data                                                                                              and
    research                  partner list          • Develop high level         roll-out                      recruitment
  • Initial view of         • Joint Venture and       target operational       • Business planning           • Launch sales
                              structuring options     model                      and financials
    potential in                                    • Finalise advance                                         incentive
    market                  • Evaluation of entry                              • Reporting and                 programs/KPI
                              model options and       hires short list
  • First filter of                                                              governance                    tracking
    potential                 optimal business                                 • Appoint key                 • Lead
    strategic                 model                                              executives                    generation
    partners                  recommendation                                                                   management
                            • Financial                                                                      • Establish JV
                              modelling and                                                                    committees
                              high level
                              business case

Thank you

        14:00/15:15- Panel 2

Mergers & Acquisitions between
       India and Europe

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