Business in India in 2013 – major acquisitions by and of Indian companies
In 2013, the Indian business sector saw a number of buyouts. On December 5, Mylan, a specialist in generic drugs from Pennsylvania, US, bought a unit of Strides Arcolab, an Indian company. The deal was closed at 1.75 billion dollars. With this transaction Mylan has now been able to improve its presence in the market for injectable drugs – incidentally this market is also known for its high rate of growth. The agreement with the unit named Agila Specialities had been announced for the first time during December 2012 and since then it has seen some changes.
The importance of the deal can be understood from the statements made by Heather Bresch who serves as the Chief Executive of the organization. She opined that the acquisition will help them gain an important position in the global market for injectables. This deal, according to her, would also play a major role in making Mylan’s injectables vertical a stronger and bigger one. With this deal the Pennsylvania based company would also be able to venture into hitherto unexplored and potentially important markets. Thanks to this deal it now has 13 units in 6 countries.
Initially it was estimated that the buyout will be worth 1.6 billion dollars but a further 150 million dollars had to be included in the deal in order to take care of regulatory commitments and acquisition expenses. The US Food and Drug Administration had issued concerns regarding yet another unit in the capital city of Karnataka. As a result of this, now an amount of 250 million dollars have been kept aside as hold back and will only be paid to Stride if it is able to fulfill certain regulatory conditions.
The US based company has stated that the global market for injectable drugs is supposed to grow at a yearly rate of 13% in the period from 2011 to 2017 and the major reason for the growth would be its supremacy over other forms of dosage and expiries of patents.
During July, Cipla, a leading drug manufacturing company of India, bought Cipla Medpro from South Africa for a price of INR 2707 crore. It had in fact bought all the shares of the South African company. Subhanu Saxena, the Global CEO and Managing Director, had stated that this deal was a part of their plan to go up the value chain as it would help them create a prominent sales entity outside the country. Yet another key aspect of this deal was that it would help them increase the organizational footprints in South Africa and consequently Africa by extension.
This deal, as per Saxena, would also assist Medpro to strengthen its position in the national pharma markets by way of using the wide array of products at the disposal of Cipla as well as its immense technical knowhow. The Takeover Regulation Panel in South Africa had consented to the deal on June 27 and the shareholders had agreed to the same during the previous month. The Cipla management team had given the approval during March itself. Incidentally, during November 2012 Cipla had tried to acquire 51% shares at 8.55 South African rands for each share.
During February 2013, Mahindra & Mahindra bought all the ownership of Navistar, a US based company in two joint ventures by the companies – Mahindra Navistar Engines and Mahindra Navistar Automotives. With this deal, Mahindra got the right to market all the products and services of both the companies. Strangely though, the financial details for the deals were not disclosed.
As part of the deal, Navistar would continue to procure components from India as well as receive engineering services from Mahindra. Navistar will also help Mahindra as far as license agreements and support for the products are concerned. Incidentally during December 2012 Navistar had expressed willingness to leave the JV so that it could focus on making its basic business operations stronger in North America.
A study conducted by the Indian School of Business has found that in 2013, companies in India had been looking for chances to explore newer markets as well as assets when they were deciding about buyouts. The study also stated that cultural similarity, or even geographical for that matter, was not a major factor in this case. This study focuses primarily on companies that have had the highest exposure in the international market.
Under normal circumstances companies look for similarities in areas such as geography, economy, administration or culture when they are looking to acquire a company outside their home territory. The study has been published in ISB Insight, which is the 3-monthly research publication of the business school, and done in association with Fundacao Dom Cabral from Brazil that has rated companies in India on the business being done by them outside the country. Incidentally the one with the maximum exposure overseas is ONGC Videsh.