Outbound deals worth $7 billion in making

Spurt in deals for European assets amid economic stress in the continent

Indian companies have made $1.7-billion outbound deals so far this year, against $9.6-billion overseas acquisitions in 2016. But this is set to change as outbound deals worth over $7 billion is in making with a spurt in deals now, especially for assets in Europe. The continent is going through economic stress, as demand has slumped on the back of its ageing population. 

While Eicher Motors plans to make about $2-billion bid for motorcycle maker Ducati, Aurobindo Pharma and Intas Pharmaceuticals are in race to buy Teva’s European assets in a deal valued about $1 billion. 
 

Also, Kumar Mangalam Birla-promoted Hindalco is evaluating possible bids for Dutch firm Constellium, through its subsidiary Novlis. Credit Suisse expects the Dutch company to be valued at $1.7-1.9 billion. Novelis is also considering a bid for US-based Aleris, which could be valued at over $2.3 billion.

Novelis has a deleveraged balance sheet and is healthy enough to take advantage of “any growth opportunities that present themselves”, Hindalco Managing Director Satish Pai had said earlier.

“The assets in Europe are relatively under-priced compared to the US, so deals are available at attractive valuations,” said Ajay Arora, partner and leader, mergers and acquisitions, EY. 

In another acquisition in Europe, auto component maker Motherson Sumi bought Finland-based PKC Group early this year in a deal valued at $604 million. This has been the largest outbound deal so far this year.  

“Large Indian corporations with strong balance sheets and cash on their books are increasingly willing to evaluate acquisitions overseas. However, they continue to be selective and cautious, especially in the case of outbound acquisitions. Progressive technologies and established brands continue to attract Indian corporate houses to Europe,” Arora said.

It is not for the first time that Indian companies are looking for assets in Europe. Last year, Intas Pharmaceuticals had acquired the generics business of Actavis in the UK and Ireland from Teva for an enterprise value of $732 million in an all-cash deal. 

India’s largest overseas acquisition has also been in Europe. Tata Steel acquired Anglo-Dutch steel maker Corus in a $12.1-billion deal in 2007.  

“Companies with sizeable operations in Europe are under stress, as demand has slumped on the back of ageing population,” said Ajay Garg, managing director, Equirus Capital, a Mumbai-based investment banking firm. “Indian companies with ambition to become larger global players do not want to miss on these opportunities,” Garg said.