Emerging Markets : Bid Fever Takes Hold



Bidding war over

Indias wireless


Reliance Communications (RCL), Indias second-largest wireless telecom company, and Vodafone, the worlds largest wireless company, are heading for a showdown over a 67% stake in Indias fourth-largest wireless company, Hutchison Essar. Reliance has already announced a $1.2 billion global depository receipt (GDR) offering and a $2 billion foreign currency debt placement to part-fund its proposed acquisition of Hutchinson Essar. The balance would come from private equity players including the Blackstone Group and banks such as Citigroup, Deutsche Bank and UBS. However, Hong Kong-based Hutchinson Whampoa, which owns 67% of Hutchison Essar, has already granted Vodafone exclusive access to the companys books, effectively discouraging Reliance from bidding. As a result, the $18 billion deal will almost certainly end up in court. If Reliance wins, it will become the largest wireless company in India, with 50 million subscribers.

Domestic acquisitions are not the only thing absorbing Indian companies. Ranbaxy Laboratories, the largest Indian generic pharmaceutical company, announced its intention to bid for the generic drug business of German pharmaceutical giant Merck. This is likely to be the largest acquisition attempted by an Indian pharmaceutical company and is part of a growing trend of mega-acquisitions by Indian industry. Indian generic drug companies have a track record of successfully pursuing generic acquisitions in Europe. Ranbaxy made five overseas acquisitions in 2006, of which four were in Europe. If successful, the Merck generics acquisition will turn Ranbaxy Laboratories into a $4 billion-a-year business. The last mega generics acquisition by an Indian company was Dr Reddys Laboratories 2006 acquisition of Germanys Betapharm Arzneimittel for $624 million.

The fever is rising in the Indian real estate markets, too. According to real estate consulting firm Cushman & Wakefield, foreign direct investment in Indian real estate is likely to touch $10 billion in 2007. Around 90 foreign real estate funds from Asia, Europe and the United States have already commenced operations in India, with particular interest from Southeast Asia-based funds. Real estate prices in Indias key cities are skyrocketing as a result.

Aaron Chaze