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Srei, partner buy 57% of power distributor DPSC

Aveek Datta — Fri, 20 Nov 2009 17:48:00 GMT

Kolkata: Non-banking finance company Srei Infrastructure Finance Ltd and a partner on Friday bought a 57.18% stake in power distribution firm DPSC Ltd for Rs171.85 crore. DPSC is one of the country’s oldest power distribution firms—it supplies 125MW of power in a 620 sq. km area in an industrial belt in West Bengal and Jharkhand, and produces 42MW of power. DPSC owns 200 acres of land and has “some approvals” for setting up a 500MW power plant, according to the tender document circulated among bidders.

The stake in DPSC, for which an auction was held on Friday, is jointly held by government-owned Andrew Yule and Co. Ltd, Life Insurance Corp. of India (LIC) and United India Insurance Co. Ltd. Andrew Yule and its subsidiaries own 15.21% in DPSC, while LIC and United India own 30.61% and 11.36%, respectively.

The winning bid was made jointly with India Power Corp. Ltd (IPCL), a 50-50 joint venture between Srei and Bhaskar Silicon Pvt. Ltd, a green energy producer. They offered Rs710 per share, outbidding DPSC’s subsidiary Descon Ltd, which offered Rs705.

Kolkata-based power utility CESC Ltd was also in the fray, opting out after the ninth round, according to Andrew Yule chairman Kallol Dutta. CESC offered Rs625 a share, he said.

The IPCL-Srei combine emerged as the highest bidder after 16 rounds. DPSC’s shares jumped 12% on the National Stock Exchange to Rs682, while the bourse’s benchmark Nifty index gained 1.27% to close at 5,052.45 points.

In keeping with Indian takeover laws, the Srei-IPCL combine, which holds about 8% of DPSC already, will make an open offer for at least 20% more of the company’s shares.

Descon has pledged its 32.31% stake with JSW Energy Ltd. A Descon official, who declined to be named as he isn’t authorized to speak to the media, said his company was “very likely” to sell its stake in DPSC if the Srei-IPCL combine made an offer for its holding.

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EBay completes Skype sale

AFP — Fri, 20 Nov 2009 05:33:00 GMT

Washington: Online auction giant eBay announced Thursday it had completed its sale of Skype to an investment group that includes the two founders of the Web communications company.

The previously announced sale of a 70% stake in Skype for some $2 billion had been held up by lawsuits filed by Skype founders Niklas Zennstrom and Janus Friis.

Zennstrom, a Swede, and Friis, a Dane, settled the suits this month and will hold a 14% stake in Skype through their new company, Joltid Ltd.

56% will be held by an investor group led by private equity firm Silver Lake Partners, the Canada Pension Plan Investment Board, venture capital firm Andreessen Horowitz and others.

eBay will retain a 30% equity investment in Skype.

eBay received $1.9 billion in cash and a note for $125 million for the 70% stake in Skype.

The deal values Skype at $2.75 billion.

eBay purchased Skype from Zennstrom and Friis in 2005 for a price tag that eventually exceeded $3.1 billion.

Skype, which has its headquarters in Luxembourg, bypasses the standard telephone network by channeling voice and video calls over the Internet.

Its allows users to call others free of charge and provides the ability to connect with land lines or mobile devices at low rates.

Scripps to acquire 69% in NDTV Good Times

A staff writer — Thu, 19 Nov 2009 17:48:00 GMT

New Delhi: Cash-strapped broadcasting company New Delhi Television Ltd (NDTV) can now breathe easy. The company has not only found a strategic partner for its lifestyle channel in Scripps Networks Interactive Inc. of the US, it has also considerably reduced its debt burden by repurchasing $100 million (Rs464 crore) worth of bonds.

The company told the Bombay Stock Exchange on Thursday that its UK subsidiary, NDTV Networks Plc, has bought back the bonds due in 2012 for $72.40 each. The buy-back has been financed through bank loans, it said in a statement.

The firm also announced that US-based lifestyle broadcaster Scripps Networks Interactive is acquiring a 69% stake in the company’s lifestyle programming subsidiary NDTV Lifestyle for $55 million. NDTV Lifestyle operates food and lifestyle channel NDTV Good Times.

NDTV will retain the remaining 31% stake in the venture.

The transaction is expected to be completed by the end of the first quarter of 2010. “NDTV Good Times channel and NDTV Lifestyle serve as sturdy platforms for us to build lifestyle television programming businesses in one of the world’s most promising media market places,” Greg Moyer, president of Scripps Networks International, said in a statement.

Smeeta Chakrabarti, chief executive, NDTV Lifestyle, will continue to head the channel that was launched in 2007. In addition to operating NDTV Good Times, Scripps Networks Interactive and the NDTV group plan to launch other lifestyle TV channels.

UltraTech board approves merger with Samruddhi

Joel Rebello — Sun, 15 Nov 2009 16:38:00 GMT

Mumbai: The board of directors of UltraTech Cement Ltd, a unit of the Aditya Birla Group, and affiliate Samruddhi Cement Ltd agreed to merge to create the country’s largest cement firm with a 20% market share and total capacity of 48.8 million tonnes per year.

Samruddhi shareholders will get four UltraTech shares for every seven shares owned in Samruddhi, the Aditya Birla Group said in a statement.

Future plans: A construction site in Noida. The merger will achieve the group’s objective of consolidating its cement business. Mint

“The merger is to be undertaken through a court approved scheme of amalgamation... The appointed date for the merger is 1st July 2010,” the statement said.

Sunday’s announcement is the second step in the process which started on 3 October, when the Aditya Birla Group-owned Grasim Industries Ltd announced the spin-off of its cement business into Samruddhi, a wholly owned subsidiary, to eventually consolidate its cement business under UltraTech. The merger will achieve the group’s objective of consolidating its cement business into a single entity, thereby creating a platform for pursuing aggressive growth, chairman Kumar Mangalam Birla said, according to the statement.

“The Samruddhi demerger is already in the Madhya Pradesh and Gujarat high courts. It will take another four to six months for the courts to give us the go-ahead. We will then list Samruddhi, possibly in March, for about four to six months. Only after this will we merge it into the new UltraTech,” a senior Aditya Birla Group official said on condition on anonymity.

At the end of the merger, the promoter group through Grasim will hold 60.3% of UltraTech, compared with the 65% its owns in the company in its current form. Shareholders will hold 39.7% in the company.

Gaurav Dua, head of reserach at local brokerage Sharekhan Ltd, said the share swap favoured UltraTech.

“I had expected 1.5 shares of Samruddhi for each of UltraTech so this is better than my expectations for UltraTech. I would prefer UltraTech now because of the company’s potential going forward,” he said.

K.C. Birla, chief financial officer of UltraTech, said the combined profitability and cash flows post merger will help the firm increase market share.

“The financial indicators post merger will support UltraTech to maintain its credit rating. We expect UltraTech’s stock to be rerated on completion of the merger process,” he said in the statement.

UltraTech shares have risen 28.6% in the past six months to Rs729.95 in Mumbai trading. The benchmark Sensitive Index climbed 38.4% during the same period.

(‘Bloomberg’ contributed to this story.).

BSNL may submit financial bid for Zambia Telecom

PTI — Sun, 15 Nov 2009 05:56:00 GMT

New Delhi: State-run BSNL is likely to submit financial bid for a majority stake in Zambia’s leading telecom company, Zambia Telecommunications Ltd (Zamtel).

“We are doing due diligence at the moment after qualifying in the first round. I think there is great possibility that we will put up the financial bid for Zamtel based on our estimation emerging out of the current due diligence process,” BSNL CMD Kuldeep Goyal said.

Yesterday, chairman and managing director of MTNL — the other PSU which has also been shortlisted for the second-round of bidding process — R S P Sinha said the company is interested in Zamtel.

The Zambian government is offering between 51% and 75% of its stake in Zamtel.

The process is likely to be completed in the first quarter of 2010.

South Africa’s Telkom, Africa’s biggest fixed-line operator, which is sitting on about 10 billion rand ($1.35 billion) after selling its mobile unit Vodacom to Britain’s Vodafone, is on the shortlist.

The prequalified companies and consortia have been invited to participate in the due diligence process that has started from 2 November and will continue till 23 December.

Others on the shortlist are a consortium of Russia’s second-biggest mobile phone operator Vimpelcom and Altimo, the telecom arm of Russia’s Alfa Group; a consortium of Egypt’s Orascom Telecom and its subsidiary Telecel Globe; Angola’s UNITEL — a consortium of Unitel S A and Angola Cables S A; Portugal Telecom; and a consortium of Libya’s LAP Greencom and LAP Green Networks.

Zamtel’s revenue for the year to end-December was $100 million. It is Zambia’s only licenced fixed-line provider of voice and data communications.

HP-3Com deal raises stakes in tech M&A battle

Ritsuko Ando / Reuters — Sat, 14 Nov 2009 07:01:00 GMT

New York: Major technology companies seem to be launching multibillion-dollar acquisitions every other week, and those who don’t join the race may be at risk of getting run over.

Hewlett-Packard Co challenged Cisco Systems Inc this week by announcing a $3 billion deal for network equipment maker 3Com. It came after Cisco stepped up its dealmaking and expanded into the server market to compete with HP, IBM and Dell Inc.

“I think this is the start,” said Ronald Gruia, analyst at Frost & Sullivan. “Once you have one acquisition, you can have a cascading effect.”

The motivation behind this wave of dealmaking by the tech majors is to broaden product portfolios and provide for all of customers’ IT needs -- from computing, security, storage and networking to online videoconferencing.

HP’s 3Com deal comes after a string of M&A news including Dell’s deal for Perot Systems Corp, Xerox Corp’s deal for Affiliated Computer Services Inc and Oracle Corp’s deal for Sun Microsystems.

IBM, which bid for but failed to win Sun, has been comparatively quiet on the dealmaking front, doing some smaller deals to expand its services business and signing sales partnerships but nothing viewed by Wall Street as a game changer.

Pressure is mounting on technology companies to diversify to satisfy shareholders’ demands for more dramatic sales growth as the economy recovers, analysts said.

“There are three big enterprise infrastructure vendors today: IBM, HP, and now Cisco. And they’re all competing against one another,” said Broadpoint AmTech’s Brian Marshall.

Smaller, niche technology firms, on the other hand, are increasingly open to buyouts as a way of securing a solid sales channel. A smaller company bought by a large vendor like Cisco or IBM could turn into a serious competitor overnight.

M&A deals are also a response to customers looking for simpler and cost-efficient ways to run data centers, which are struggling to cope with increasing data traffic.

“All of us are under pressure in the IT environment to allow businesses to do more with less,” VMware chief executive Paul Maritz told Reuters in an interview.

“People are trying to say, rather than selling everything piece by piece on an a la carte basis, requiring customers to be their own master chefs, we’re going to sell more prepackaged meals here.”

Brocade, Riverbed, F5

Companies like Riverbed Technology Inc and F5 Networks Inc, which specialize in supporting faster and more secure online applications, are widely seen as possible acquisition targets.

F5 shares have risen 75% in the last six months, though Riverbed is up only 18%. Both companies trade at around 25 times forecast 2010 earnings.

And while HP’s offer for 3Com made it look like Brocade Communications Systems Inc may have missed out, some analysts said the switching and storage networking company is still an attractive target.

“I think Brocade is still definitely in play,” Gruia said, adding that IBM could be a buyer. Brocade shares have fallen more than 12% since HP announced the 3Com deal.

Most analysts, however, said IBM is likely more interested in expanding in software and services than hardware. It has bought business analytics company SPSS Inc for $1.2 billion.

“They’re really going to focus on software because that’s where the value and the real margin structure in growth is,” said Marshall.

Analysts say HP and Dell could also do more deals, and many see network equipment maker Juniper Networks Inc eyeing M&A to compete against Cisco.

Other acquisition targets include wireless technology firms as well as companies specializing in online video, analysts said. They are particularly focused on Polycom, whose bigger rival Tandberg is being courted by Cisco. The Tandberg deal is not yet final as some shareholders are seeking a higher price.

Partnerships

Polycom CEO Robert Hagerty said that rather than find a buyer, it was trying to boost sales partnerships with vendors like HP and IBM. That is similar to the strategy at Brocade, which has forged more deals with IBM and non-Cisco vendors.

Analysts said depending solely on such partnerships may leave many companies vulnerable. Resale partnerships can be cast aside when one party enters an M&A deal with another.

For example, video network infrastructure company Radvision is a close partner of Cisco, but analysts say some of its sales are at risk if the Tandberg deal goes through.

But some also note that acquisitions themselves are high-risk endeavours. Cisco chief John Chambers has said that around 90% of acquisitions fail, in general.

“As we all understand, the vast majority of acquisitions fail, and truly meaningful strategic alliances have an even poorer success rate,” Chambers told analysts recently.

The cross-Atlantic merger of Alcatel-Lucent, which posted its 12th straight loss in the third quarter, is widely cited as a failure.

HDFC enters education loan segment with 41%stake in Credila

Anup Roy — Fri, 13 Nov 2009 16:41:00 GMT

Mumbai: India’s largest mortgage lender Housing Development Finance Corporation (HDFC) has bought a 41% stake in education loan provider Credila Financial Services Pvt. Ltd. The stake in the privately held company, valued at about Rs10 crore, has been bought from DSP Merrill Lynch Capital Ltd.

“We see business and social opportunity here and would like to grow this business as student loan segment is growing at 25-30% annually,” said V.S. Rangan, senior general manager treasury of HDFC. Credila has so far disbursed about Rs20 crore in education loans over the past two-three years, Rangan said.

FedBank Board postponses CSB takeover discussion

Ajayan — Fri, 13 Nov 2009 16:29:00 GMT

Kochi: The Federal Bank Ltd board on Friday deferred a discussion on a possible acquisition of Kerala-based Catholic Syrian Bank (CSB) to its next meeting because it has not yet received a full due diligence report from consulting from KPMG.

M. Venugopalan, managing director and chief operating officer of Federal Bank, said the board is awaiting the final report of consultancy firm KPMG which has completed financial due diligence for CSB. “Once the final report is got, the matter may be taken up at the next board meeting which should take place sometime in December,” he told Mint.

Mint reported 13 November that the Thrissur archdiocese of the Roman Catholic church has opposed any takeover of CSB on grounds that it would dilute the unique identity of the bank.

As for whether the deferment would give it more time, CSB Protection Committee’s convener Johnny Chandy said all steps would be taken to bring in new investors, including non-resident Indians. The committee, with the backing of the church, is opposing any merger or acquisition of CSB.

“The Committee has been in touch with CSB shareholders and will hopefully strike deals with them for the investors at the earliest,” he told Mint.

UltraTech board to meet Sunday to dissuss Grasim merger

Joel Rebello — Fri, 13 Nov 2009 16:09:00 GMT

Mumbai: The board of directors of UltraTech Cement Ltd will meet 15 November to consider a proposal to merge Grasim Industries Ltd’s cement business with itself. The meeting is expected to take into account suggestions by a committee of directors on the legal and financial aspects of the deal.

The Aditya Birla group-owned Grasim Industries in October had announced plans to spin off its cement unit into another company called Samrudhi, which in turn would be merged with another group company UltraTech Cement. Earlier in October, Samrudhi Cement Ltd had sent UltraTech a proposal to merge itself with that firm. The UltraTech board, “having found the proposal attractive” had authorized the committee of directors to give their opinion on the legal and financial aspects.

PVR to acquire DT Cinemas, gets Thai firm on board

Shuchi Bansal — Fri, 13 Nov 2009 15:29:00 GMT

New Delhi: The Rs350 crore film exhibition firm PVR Ltd, which operates 108 movie screens, on Friday reached an agreement with the DLF group to buy the latter’s DT Cinemas business through a part-stock and part-cash deal.

Grabbing screen: PVR chairman and MD. Ajay Bijli. Madhu Kapparath/Mint

DT Cinemas operates 26 screens. As part of the deal, DLF group has agreed to offer exclusive rights to PVR to be the anchor cinema hall partner in its future mall projects. Ajay Bijli-promoted PVR would also issue about 2.5 million shares to DT Cinemas, representing 10% of its share capital, and pay Rs20.2 crore to fund the acquisition of DLF group’s exhibitions business.

The company also announced that Thailand’s retail entertainment and multiplex firm Major Cineplex Group Plc will buy a 10% stake in PVR. The Thai firm would be investing about Rs42 crore in PVR by subscribing to some 2.5 million new shares for Rs165 apiece, a premium of 19% over the closing stock price of PVR of Rs139 on the National Stock Exchange on Thursday. The scrip closed at Rs140.25 on Friday.

Major Cineplex is listed on Thailand Stock Exchange and operates some 350 screens, 500 bowling lanes, 300 karaoke rooms and two ice-skating rinks.

“We have been working with Major Cineplex for a year now but the strategic investment will help us to leverage Major’s learnings and expertise in international market,” said Bijli, PVR’s chairman and managing director.

HDFC to buy 41% stake in Credila Financial

PTI — Fri, 13 Nov 2009 13:13:00 GMT

Mumbai: The country’s largest mortgage lender Housing Development Finance Corporation (HDFC) on Friday said it would acquire about 41% stake in the education loan provider - Credila Financial Services held by DSP Merrill Lynch Capital.

“The corporation has agreed to acquire approximately 41 per cent in the fully diluted equity share capital of Credila Financial Services from DSP Merrill Lynch Capital Ltd,” HDFC said in a filing to the Bombay Stock Exchange (BSE).

The acquisition of stake is subject to compliance with applicable regulations, it added.

The company, however, did not disclose further details in this regard.

DSP Merrill Lynch Capital Ltd is a minority investor in Credila Financial Services.

Shares of HDFC closed at Rs2,758.45, up 0.54% from its previous close on the BSE.

HP will acquire 3Com for $2.7 bn

Steve Lohr / NYT — Thu, 12 Nov 2009 18:03:00 GMT

Technology firm Hewlett-Packard Co. (HP) said on Wednesday that it had reached an agreement to acquire 3Com Corp., a provider of computer network gear, for $2.7 billion (Rs12,555 crore) in a deal that HP plans as a springboard for an assault on the market leader in networking, Cisco Systems Inc.

In an interview, Ann M. Livermore, an executive vice- president of HP, described computer networking as a $40 billion-a-year market with high profit margins that is growing briskly and dominated by Cisco, which has so far had little head-to-head competition. “HP is eager and now positioned to disrupt the networking industry,” she said.

Competitive edge: HP chief executive officer Mark V. Hurd. Jeff Carlick / Bloomberg

The offer price, at $7.90 a share, is at a premium of about 39% to 3Com’s closing price on Wednesday. The deal was announced after the market closed.

Under Mark V. Hurd, its chief executive, HP has been beefing up its network equipment offerings to compete more aggressively against Cisco to sell data-centre gear to corporations. But so far HP has mostly supplied smaller equipment used in office networks.

Cisco attacked one of HP’s core businesses this year by entering the market for server computers used in data centres. It has also teamed with EMC Corp., another technology giant, to sell data centre equipment to businesses.

In 3Com, HP is acquiring a company with a rich heritage in network technology, analysts say. But it lacks Cisco’s size and credibility in the data centre market, where large corporate customers look for strong suppliers who can provide a full range of products and services. HP may well be able to fill those gaps.

“3Com, with HP’s backing, is capable of making a real run at Cisco,” said Rob Enderle, an independent analyst. But while 3Com will give HP crucial technology, further product development and marketing will be needed to compete directly with Cisco, analysts said. “It will be a two-year process to roll this out,” said Jeffrey Evenson, an analyst at Bernstein Research. HP also provided investors on Wednesday with an early look at its earnings for its fiscal fourth quarter, which ended in October, and raised its estimates for the next year.

HP reported a profit, excluding some items, of $1.14 a share in the fourth quarter, which slightly beat expectations of $1.12 a share, as compiled by Thomson Reuters.

Revenue in the quarter was $30.8 billion, down 8% from a year earlier. But the firm’s sales performance beat analysts’ forecasts by $1 billion.

ArcelorMittal acquires 13.8% stake in Czech arm

PTI — Thu, 12 Nov 2009 12:38:00 GMT

New Delhi: The world’s largest steel maker, ArcelorMittal, on Thursday said it would acquire additional 13.8% stake in its Czech arm ArcelorMittal Ostrava for $404.3 million (around Rs1,900 crore).

“ArcelorMittal...has signed an agreement to acquire a 13.881% stake in ArcelorMittal Ostrava from a subsidiary of PPF GROUP, an international financial and investment group in Central and Eastern Europe, for approximately USD 404.3 million,” the steel maker said in a statement here.

The deal will be completed next year, when “the final payment will be made,” which will result in exit of the minor shareholder from the company.

The transaction values the Czech firm, at an enterprise value of about “USD 264 per tonne of liquid steel capacity.” ArcelorMittal Ostrava has a capacity to produce three million tonnes of steel per annum.

The deal will take the NRI billionaire LN Mittal-led firm’s stake to about 96% in the subsidiary.

“ArcelorMittal will thus increase its stake in ArcelorMittal Ostrava to approximately 96.4% and PPF GROUP N V will step out of the Czech steelmaker’s shareholding structure,” the statement said.

ArcelorMittal currently holds 82.548% stake in the Czech firm.

Infosys BPO to acquire US-based McCamish Systems

Reuters — Thu, 12 Nov 2009 06:47:00 GMT

Bangalore: The back-office services unit of Infosys Technologies Ltd, India’s No. 2 software exporter, will acquire US-based McCamish Systems for an upfront payment of $38 million to boost its service offerings.

Infosys BPO will pay an additional $20 million to the sellers on meeting certain financial targets, its chief executive Amitabh Chaudhry said, but declined to disclose the targets that have been set.

McCamish Systems, which posted $38.2 million in revenue in 2008, provides business process outsourcing solutions to the insurance and financial services companies in the United States. It counts 10 of the 20 top insurers among its clients.

“This acquisition gives us the ability to pitch for bigger deals in the insurance sector,” Chaudhry told Reuters in a phone interview. He said the deal would be completed later this year and revenue would start flowing from January.

Shares in Infosys, which the market values at $29 billion, were up 0.5% at Rs2,319.95 by 0655 GMT in a flat market. The stock had risen 1.7% in opening deals.

McCamish has 260 staff, and Chaudhry said the employees would become part of Bangalore-headquartered Infosys BPO, whose offerings include finance and accounting, human resource and legal services outsourcing.

Indian outsourcing firms have thrived by providing Western firms with services such as processing insurance claims, managing payrolls and customer support.

The boom in business process outsourcing, or BPO, is built on a large, skilled and cheap English-speaking workforce, but a global economic slowdown has crimped spending by companies.

Infosys BPO, which was set up as a separate unit of Infosys in 2002, is looking to buy firms in the United States and Europe, Chaudhry had said on Monday, adding the size of any deal would be between $50 million and $100 million.

Infosys, which has shied away from large acquisitions in the past, has built up a cash pile of $2.8 billion and is now looking for buys to establish its presence in new markets and add new service lines.

In 2007, Infosys signed a $250 million outsourcing contract with Royal Philips Electronics, and bought three of the Dutch firm’s back-office centres to expand its presence in fast-growing European markets.

US, Europe cultural bent hangs over Oracle’s battle for Sun

Steve Lohr and James Kanter / NYT — Wed, 11 Nov 2009 18:04:00 GMT

Oracle Corp.’s battle with European regulators over its acquisition of Sun Microsystems Inc. boils down to a conflict about the importance of free software and the government’s role in protecting it.

Stalling deal: Sun Microsystems CEO Jonathan Schwartz. Paul Sakuma / AP

The verbal salvos heated up this week after the European Union (EU) issued formal objections on Monday to a bid by Oracle, the giant software maker, to buy Sun for $7.4 billion (Rs34,484 crore).

Oracle immediately pilloried the objections, saying they were based on “a profound misunderstanding” of the software market.

On Tuesday, the EU struck back, with a spokesman for the union’s competition commissioner, Neelie Kroes, dismissing Oracle’s criticism as “facile and superficial”.

At one level, the sharp exchanges fit a familiar pattern in antitrust disputes between Brussels and American technology companies, including Microsoft Corp. and Intel Corp. The Americans tend to portray the European authorities as technically clueless bureaucrats, while the Europeans cast the big American businesses as arrogant bullies.

But the Oracle case also reflects very different views on open source software by antitrust officials in the US and Europe.

The European regulators want Oracle to sell off a unit of Sun that manages the most popular open source database programme, MySQL. Like all open source products, MySQL code is distributed free, and the company tries to make money by charging corporate customers for technical support and extra features.

The European antitrust officials fear that Oracle, the largest maker of proprietary database software, will have little incentive to sustain and invest in MySQL, a potential rival.

The US justice department does not share the European concerns. After the Brussels decision on Monday, the US antitrust regulators made an unusual statement, saying that it had concluded there was a “large community of developers and users of Sun’s open source database” who would likely keep maintaining and improving MySQL regardless of Oracle’s future decisions about the product.

Michael A. Cusumano, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, said the trans-Atlantic “megawar” over open source software was not surprising.

“It makes sense that the Europeans come to the defence of open source companies because the big proprietary companies are nearly all American,” he said. (The exception is SAP AG, the large German maker of business management software.)

European governments have long viewed open source software as a potential tool of economic development and independence.

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Wipro eyes acquisition in BPO space

PTI — Tue, 10 Nov 2009 15:44:00 GMT

New Delhi: Wipro Technologies Ltd said on Tuesday that it is looking for an acquisition in the business process outsourcing (BPO) space, which is likely to be the next engine of growth for the information technology (IT) industry.

Future prospects: Suresh Vaswani says BPO will drive growth for the IT industry. Rajkumar / Mint

“The economy has improved. The IT demand situation is certainly improving. The deal pipeline is good, the demand environment is building up,” joint chief executive officer Suresh Vaswani told reporters on the sidelines of the India Economic Summit. “BPO has strong performance... BPO will drive growth for the IT industry. Acquisition is part of our strategy we keep looking at it.”

The company is also optimistic about the current quarter.

“We have given a fairly strong guidance for this quarter which is substantially more than what we gave last quarter,” Vaswani said.

He added that “all sectors are likely to grow, including banking, financial services and insurance”.

About the pricing pressure faced by Wipro, he said customers are not looking at price discounts but at substantial change in cost structure. “We are doing more fixed-price projects, which now form 40% of the contracts we have,” Vaswani said. “The fixed price models give both our customers and us a win-win situation.”

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Reliance close to $6 bn overseas buy: paper

Reuters — Mon, 09 Nov 2009 10:02:00 GMT

Mumbai: Indian energy giant Reliance Industries is close to a nearly $6 billion overseas acquisition and the likely target is the assets of petrochemicals firm LyondellBasell, the Economic Times reported on Monday, citing an unidentified banker.

Luxembourg-based LyondellBasell filed for bankruptcy protection in January, unable to meet its debt obligations after demand dropped for petrochemicals products during the global economic downturn.

Reliance could buy the US and European assets of LyondellBasell, the paper said, citing an unidentified banker.

At 2:00pm, shares in Reliance were up 2.8% to Rs2,012, in a Mumbai market that was up 1.45%, having risen as much as 3.6% to their highest since 29 October.

“Reliance has an unleveraged balance sheet, and they have some money on them,” Deepak Pareek, an oil and gas analyst at Angel Broking said.

“An acquisition will put it on a different orbit.”

Last month, Maurice Bannayan, a senior vice president at Reliance, told Reuters the firm was negotiating to acquire refinery and petrochemical units in the United States and Europe and could finalise a deal by end-2009.

In September, Reliance Industries raised about $660 million in a share sale that analysts said was likely to help the country’s largest listed firm make acquisitions.

A company official, who declined to be named because he was not authorised to speak to the media, said a team of company officials was currently in the United States, but declined to elaborate on what it was doing there.

Angel’s Pareek said while the outlook for the petrochemicals sector was muted, an acquisition could bear fruit over the longer term if Reliance managed to secure low valuations.

Reliance would likely make an announcement before its annual shareholders meeting on 17 November, the Economic Times said, citing a source close to the development.

A Reliance spokesman declined to comment on the newspaper report, but said the company was always considering options for acquisitions in India and abroad.

“The difficult operating environment of the past year has made available several interesting opportunities,” Reliance said in an e-mail.

LyondellBasell could not be immediately reached for comment.

In September, Indian television reported, citing sources, that Reliance could make a cash payment of $3.25 billion to Lyondell’s vendors to buy some or all of its assets.

Refining margins hit

Analysts said Reliance might consider buying assets in the petrochemicals sector, and look for organic growth in its oil and gas exploration and production businesses.

A sluggish global economy has slashed oil refining margins of Reliance Industries, leading to a fourth straight fall in quarterly profit and adding to concerns for investors already unnerved by a gas-pricing dispute.

Reliance Industries, controlled by billionaire Mukesh Ambani, is embroiled in a high-profile legal battle over a deal to sell gas to Reliance Natural Resources, led by Ambani’s estranged younger brother Anil, at below the price set by the government.

LyondellBasell is owned by investor Len Blavatnik through New York-based Access Industries.

LyondellBasell had taken on billions of dollars of debt obligations when Access Industries led a 2007 buyout. An official committee of unsecured creditors has argued that the merger set the company up to fail.

Wipro buys some Yardley businesses for $45.5 million

Deepti Chaudhary and K. Raghu — Thu, 05 Nov 2009 19:00:00 GMT

Bangalore: Wipro Ltd’s acquisition of some businesses of Yardley is the fifth in the consumer products and lighting space by the company in the past five years, a period that seen the revenue of the company’s consumer division grow fourfold to Rs2,997.5 crore (excluding the Yardley acquisition).

Six years ago, Wipro’s consumer care and lighting arm was mulling ways of getting into the glucose drinks segment.

Instead of starting from scratch and going through the process of introducing a new product in the market and building the brand over years, the firm took a short cut. It acquired Glucovita, a glucose powder brand, from Hindustan Unilever Ltd.

Click here to view a slideshow of Wipro’s non-IT acquisitions

Also Read Wipro’s Yardley acquisition is a good move, but not cheap

Eight months later, the firm acquired Chandrika ayurvedic soaps to add handmade soap bars to its portfolio of personal care products. And in 2007, it bought Unza Holdings Ltd, a Singapore-based consumer goods company for $246 million (around Rs1,159 crore today), to enter the South-East Asian markets. In between, in 2006, it also acquired North-West Switches business from India-based North-West Switchgear Ltd for $22 million.

On Thursday, continuing with its strategy of jump-starting into new markets and categories via acquisitions, the firm said it had agreed to buy some businesses of Yardley, a 240-year-old British premium personal care brand, from the UK’s Lornamead Group for $45.5 million.

Graphics: Sandeep Bhatnagar / Mint

Lornamead will retain the Yardley business, which includes soaps, body sprays and talcum powders, in Europe and the US, and Wipro will have the rights to sell the brand in Asia, Australia and Africa, giving it a foothold in the premium personal care segment in these markets.

The Yardley business that Wipro has acquired has a revenue of $24 million.

“In luxury products, margins are an average of 50% of the profit after tax value. It means more money for the company,” said Ashish Dhir, associate vice-president, Technopak Advisors Pvt. Ltd, a retail advisory.

Wipro’s stock closed nearly flat on Thursday, rising Rs2.50, or 0.42%, to Rs598.30 at the end of trade on the Bombay Stock Exchange, on a day the Sensex gained 151.77 points, or 0.95%, to end at 16,063.90.

Interestingly, Wipro has made 11 acquisitions in the information technology (IT) area since 2003.

Wipro’s IT service business still contributes to 72% of its overall revenue and 91% of its pretax profit.

But its non-IT revenue, including consumer care and a small contribution from its infrastructure engineering arm, has grown over the past five years.

In that period, Wipro’s overall and IT business revenues, at Rs25,544.2 crore and Rs22,621.3 crore, respectively, have increased threefold. As a percentage of total revenue, though, the company’s non-IT revenue dropped to 8.52% in fiscal 2009 from 11.7% in fiscal 2005.

The Yardley acquisition marks Wipro’s entry into the premium segment. The firm has a presence in the mid-market segment with brands such as Santoor soap, and Unza’s products. Consumer goods companies prefer high-end brands because of the high profit margins they offer.

“The transaction adds a very strong brand to our portfolio of personal care products. It fits into our strategy of increasing sales and brand presence in the Middle East,” said Vineet Agrawal, president, Wipro Consumer Care and Lighting.

The deal, to be completed by December, will be funded through internal accruals and add to the firm’s revenue from the March quarter, he added.

The Yardley buy will boost profit margins at Wipro’s consumer care business to 13% from 12% now, said Agrawal. “We expect our Middle East turnover to double to nearly $30 million through this acquisition. Overall, we hope to see an increase of 50 basis points in our revenues.” One basis point is one-hundredth of a percentage point.

Another analyst said the acquisition is a good fit for Wipro as it is looking for growth not just in India but also in emerging nations. “West Asia is a high-growth region owing to its high income levels. Also, a price of $45.5 million for a $24 million revenue business..., it is not a large deal,” said Abneesh Roy, senior analyst, FMCG (fast moving consumer goods), Edelweiss Capital Ltd.

Technopak’s Dhir said India may see more such acquisitions of overseas brands by local firms with companies in developed markets still reeling under a liquidity crunch. “It’s a liquidation issue. There will be a lot of M&As (mergers and acquisitions).”

Agrawal said Wipro may next look at adding products such as body washes and roll-ons to plug the gap in its personal care portfolio, which includes perfumes, deodorants and fairness creams.

It also sells lights, switches and modular furniture for offices.

Wipro may also look at shifting production of Yardley soap to Wipro’s manufacturing units in India. The company has four manufacturing facilities currently, said Dipak Kumar Bohra, general manager, finance, Wipro Consumer Care and Lighting.

deepti.c@livemint.com

Wipro buys some Yardley operations for $45.5 mn

Sumeet Chatterjee / Reuters — Thu, 05 Nov 2009 09:05:00 GMT

Bangalore: Wipro Ltd has acquired some businesses of Yardley for about $45.5 million from British personal care company Lornamead to boost its consumer care unit’s presence in the overseas markets.

Wipro, which gets about three quarters of its revenue from IT services, said on Thursday it had bought Yardley business in Asia, west Asia, Australasia and some African markets.

“These are developing countries and we wanted to have a stronger presence in these places and that’s why we looked at this acquisition,” Vineet Agrawal, president of consumer care and lighting unit of Wipro, told reporters.

The transaction is expected to be completed by mid-December and revenue from the acquisition would start flowing from the March quarter, he said, adding the acquired business currently has revenue of $24 million a year.

The acquisition would be accretive to the Wipro consumer care unit’s profit margins, Agrawal said, without giving details. The unit contributes about 9% of Bangalore-based Wipro’s total revenue.

“From margins perspective and revenue perspective, it’s a good buy,” he said.

New York-listed Wipro, majority owned by billionaire chairman Azim Premji, had acquired Singapore’s Unza Holdings, which makes personal care products, for about $246 million in 2007 to expand its consumer care product portfolio.

Analysts said the Yardley business purchase would not have a significant impact on Wipro’s financials in the near term. “It’s not that big an event for Wipro,” said Tejas Doshi, head of research at Sushil Finance in Mumbai.

“But it clearly shows that they are focused on this business and want to increase its share within the overall business.”

Shares in Wipro, which has a market value of $18 billion, were down 0.8% at Rs591 by 2.10 pm in the Mumbai market that was down 0.3%.

Godrej eyeing Rs1k crore acquisitions globally

PTI — Wed, 04 Nov 2009 11:46:00 GMT

New Delhi: FMCG firm Godrej Consumer Products Ltd is looking at several acquisition opportunities globally and has earmarked a budget of Rs1,000 crore for the purpose.

“Internationally, Godrej Consumer Products Ltd (GCPL) is looking at categories that are core to its business,” GCPL spokesperson told PTI in an e-mailed response.

The company is looking for a slew of acquisitions in different markets. In Africa, it is exploring the possibility for acquisition in the hair colour and hair care segment. While in India, GCPL is eyeing the hair care and personal care categories.

Asked about the possible size of acquisitions, GCPL said, “The company is open to deals which are valued up to Rs1,000 crore.”

Godrej Consumer had earlier expressed interest in buying its US-based joint venture partner Sara Lee’s Asian consumer business.

Sara Lee, which has earlier sold its personal care and European detergent business to Unilever in September, is pursuing sale options for the remainder of its household care business.

Godrej Consumer - which produces and markets personal care products such as soaps, detergents, deodorants, talcum powder, hair color, shaving cream and diapers - has been making international acquisitions in the past few years.