India’s M&A Activity Regaining Momentum: November Highlights
After a slowdown in India’s M&A action earlier this year, momentum is building up once again in light of a recent clarification given to a legal regulation. The Times of India reported that amendments to India’s General Anti-Avoidance Rules (GAAR) were finalized earlier this month. This controversial Indian law was crafted to combat the nation’s long-time problem of tax evasion; the section of concern for business aims to prevent tax avoidance through foreign investments. There was fear that its vague wording would give excessive power to tax officials that would result in the harassment of investors. According to a Firstpost article, a lot of Indian companies sitting on substantial amounts of cash are scouting out acquisition opportunities in the international market. It appears that firms have been able to begin taking action, especially in very recent months.
Here is a look at the November highlights of India’s M&A scene:
ONGC Videsh Ltd. agreed to buy an 8.4-percent stake in Kazakhstan’s Kashagan oil field for about $5 billion. This stake is currently held by US energy giant ConocoPhillips. According to a Firstpost article, this M&A transaction would be India’s sixth-largest merger to date. ONGC is the overseas arm of state-owned Oil and Natural Gas Corp.
After facing rejection of its offer to buy Orient Express Hotels Ltd. stock at $12.63 a share, Tata Groups’ Indian Hotels is considering increasing its offer, according to the Wall Street Journal. The Mumbai-based company’s offer included a 40-percent premium over Orient Express’s share price at the time. However, Orient Express Chairman J. Robert Lovejoy expressed that the offer was made at a time when the shares’ value had been significantly depressed. One executive articulated that he believed the stock was worth about $18 a share, about double the stock’s market price at the time of Indian Hotels’ offer.
It was reported this week that Indian conglomerate Sahara India Pariwar purchased a 75-percent interest in the Plaza Hotel New York for $575 million from El Ad US Holdings. Kingdom Holding Co., controlled by Saudi Prince Alwaleed bin Talal, holds the remaining minority interest. Fairmont Hotel and Resorts will continue to operate the luxury hotel.
In what has the potential to be India’s largest inbound M&A deal this year, U.K.-based Diageo Plc will acquire a 53.4% stake in United Spirits for $2 billion, according to a Hindustan Times article. In past years, the U.K. has been the top acquirer of Indian assets. However, Deloitte India leader Avanish Gupta says that this deal is unique and “does not signify that many more inbound deals are likely to happen.”
by Ashley Luttenegger