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Fuelled by a consolidation wave and rising confidence in the country’s economic growth prospects, merger and acquisition (M&A) activity increased to $69.75 billion across 1,195 announced transactions in 2016, beating the previous record of $66.96 billion seen in 2007, when dealmaking was at its peak, according to data compiled by Thomson Reuters.

 

The year witnessed major transactions such as the sale of Essar Oil Ltd, merger of Reliance Communications Ltd and Aircel Ltd, and acquisition of Max Financial Services Ltd’s life insurance business by HDFC Standard Life Insurance.

 

Of the top five largest deals, two were in the cements space.

 

Here are the top five merger and acquisition deals of the year:

 

Essar Oil-Rosneft

Deal value: $13 billion

 

The Ruias-promoted Essar Oil Ltd, India’s second largest refiner outside government control, clinched a deal with Russia’s largest oil company, Rosneft, United Capital Partners and Trafigura Group Pte to sell 98% in its most prized asset, the 20 million tonne per annum Vadinar refinery and Vadinar port in Gujarat.

 

The transaction included $10.9 billion for Essar Oil’s refining and retail assets, and Rs13,300 crore ($2 billion) for Vadinar port and related infrastructure.

 

Under the deal, Rosneft agreed to pick up 49% stake in Essar Oil’s refinery, port and petrol pumps, while Netherlands-based Trafigura Group—one of the world’s biggest commodity trading companies—and Russian investment fund United Capital Partners split the other 49% equity equally.

 

The remaining 2% is held by minority shareholders after the delisting of Essar Oil.

 

The deal has already received approval from the Competition Commission of India.

 

Reliance Communications-Aircel 

Deal value: $4.88 billion

 

Anil Ambani-controlled Reliance Communications Ltd inked a pact to merge its wireless business with smaller rival Aircel Ltd to create India’s third largest telecom operator by users.

 

The deal was termed one of the biggest consolidation deals in the telecom sector.

 

The new entity will combine Reliance Communications’ wireless business and Aircel’s operations in India, including all the spectrum held by the two companies.

 

The combined entity will have 187.64 million subscribers, narrowing the gap with market leaders Bharti Airtel Ltd (255.7 million) and Vodafone India Ltd (199.4 million).

 

The merger will also help Reliance Communications, which will retain all the non-wireless business, reduce its debt by Rs20,000 crore, or roughly 48% of the Rs41,362.1 crore outstanding as of 31 March.

 

Aircel, owned by Maxis Communications Bhd, will see its debt reduce by Rs4,000 crore upon completion of the transaction in 2017.

 

Both Reliance Communications and Maxis Communications will own 50% each in the merged entity and have equal representation on the board and committees.

 

HDFC Life-Max Life

Deal value: $3.02 billion

 

In August, HDFC Life Insurance Co. Ltd and Max Life Insurance Co. Ltd signed a merger agreement to create India’s largest private sector insurer.

 

Under the three-step merger process, Max Life will first combine with its parent Max Financial Services Ltd.

 

In the next stage, the insurance unit will be demerged from this entity into HDFC Life.

 

Finally, the non-insurance businesses of Max Financial will merge into group company Max India Ltd.

 

The merger will create the country’s largest private sector life insurer with total assets of more than Rs1.1 trillion and will lead to the eventual listing of HDFC Life on the stock exchanges.

 

The merged entity will have a market share of at least 11% in the life insurance space.

 

The valuation of the merged life insurance entity will be around Rs65,000 crore.

 

Dalmia Bharat-Odisha Cement

Deal value: $2.54 billion

 

In November, Dalmia Bharat Ltd and OCL India Ltd (OCL) obtained approvals from their boards to merge the two entities, in a move to create the fourth largest cement maker in the country with an installed capacity of 25 million tonnes per annum.

 

The merged entity will have annual revenue of about Rs10,000 crore.

 

Dalmia Bharat holds 100% in cement operating company, Dalmia Cement (Bharat) Ltd, which in turns owns 75% stake in OCL India Ltd.

 

The group will consolidate all its cement businesses under one listed entity, Odisha Cement Ltd, which will be renamed as Dalmia Bharat Ltd once the restructuring is complete.

 

As per the deal, Dalmia Bharat shareholders will receive two shares of the merged entity for every share held.

 

Further, Dalmia Cement, the step-down 100% subsidiary of Dalmia Bharat, will issue shares worth Rs7,200 crore to Odisha Cement.

 

Jaypee Group-UltraTech Cement

Deal value: $2.38 billion

 

In July, UltraTech Cement, the flagship cement company of the Aditya Birla Group, struck a deal to acquire Jaypee Group’s cement assets in Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh for around $2.38 billion.

 

In addition, UltraTech will acquire a 4 million tonne per annum grinding unit that is currently being constructed in Uttar Pradesh.

 

UltraTech will pay an additional Rs470 crore for completing the unit.

 

With the completion of this deal, UltraTech’s cement capacity will increase to 91.1 million tonnes per annum.

 

The deal has already received approval from the Competition Commission of India.

Source: Livemint.com