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Slow, noisy year for M&As

BS Corporate Bureau

The year 2001 may not have been as exciting a year for mergers and acquisitions in India, but Corporate India nonetheless saw some of the biggest and the noisiest deals in recent years.

The one that set the stage on fire was the "mother of all mergers" -- between BPL Communications and the Birla-Tata-AT&T combine, two of the country's largest cellular players.

The merged entity, subject to all regulatory approvals, will form the country's largest cellular company, valued at more than $2 billion and catering to a subscriber base of more than 1.15 million.

The joint venture covers 24 per cent of all cellular users in the country, and in terms of reach, 51 per cent of all fixed line telephone users and 38 per cent of the one billion Indians.

The merger has also succeeded in relegating other major players such as Hutchison to the number two position with around 1 million subscribers, and the Bharti group to third spot with about 950,000 subscribers.

The deal was announced only a year after the merger between Birla AT&T and Tata Cellular, the only time when two of the largest business houses decided to join hands.

The other big merger to make waves was between financial services behemoth ICICI and its 46 per cent banking arm, ICICI Bank. The announcement paved the way for forming India's first universal bank.

The merged entity would now be close to rivaling banking giant State Bank of India across all product lines. The merger would transform ICICI into a financial services giant with assets of more than Rs 950 billion.

The company would also be the first entity in the country to offer almost every financial product, wholesale and retail, under one roof.

This merger, or reverse merger as some would call it, has been viewed as a test case in the financial sector. If all goes well, there could well be many more such mergers in the making.

But what probably made the biggest bang, and shook the stock markets, was Aditya Birla group flagship Grasim Industries' purchase of Reliance Industries' entire 10 per cent stake in Larsen & Toubro for Rs 7.66 billion.

The deal marked the end of Reliance's controversial 12-year-old association with L&T, a company it had once threatened to take over.

The announcement, for the second time this year, highlighted Kumar Mangalam Birla's ability to strike lightening fast mega-deals.

The price paid for the L&T chunk not only saw the exit of the Ambanis from the board, but it also stalled L&T's plans to pass on the country's largest cement business to a multinational rival.

The acquisition now allows the A V Birla group, which is the third largest cement player, to increase its competitiveness as a seller in many more markets and offers the prospect of efficiency in its logistics and support functions.

Although the interest in L&T as of now is strategic as claimed, it would not be surprising to see the AV Birla group attempting to take a controlling stake in the company in the future. Hence, the deal has the potential to make even more noise in 2002 than it has till now.

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