Big, bold, beautiful: Many $500m acquisitions ahead

MUMBAI: While the ink has barely dried on its last acquisition slip, Mahindra & Mahindra on  Thursday said is acquiring a majority stake in German auto components company Schoeneweiss & Co GmbH.

The auto component major didn’t disclose any other details, though sources said the buyout could be in the $400 million range.

That’s on a par with what’s happening inside India Inc, which is emboldened by Tatas’ $7.6 billion bid for Corus Group plc of the UK.

ABN Amro, together with Deutsche Bank AG, advised Tata Steel on its purchase of Corus, the biggest foreign takeover by an India-based firm and which will make the
Mumbai-based company the world’s fifth-largest steel producer.

The Piramal group is in the process of acquiring French glass giant Saint Gobain’s Desjonqueres business for a possible $750 million - as was reported by DNA Money on November 7.

Meanwhile, Frank Hancock, the New Delhi-based managing director of ABN Amro, told Bloomberg the bank is advising on 4-5 deals that are worth $400 to $500 million.

“We’ve got four or five conversations on-going of this nature where big-sized Indian groups, but much smaller than the Tatas, have been emboldened or encouraged by what they’ve seen,” Hancock said.

“We’re talking about $400 million to $500 million transactions now being very much the norm in conversations that we’re having.”

Anything more than $200 million previously “was quite surprising,” he said. “The whole benchmark deal size hasshifted upwards.”

Pharmaceutical, technology and automobile companies are set to lead overseas acquisitions next year to compete with bigger rivals, Hancock said.

“I wouldn’t be surprised to see something really transformational, particularly in auto components, possibly also auto manufacturing” as companies in the US and Europe
seek investments, Hancock said. “These Indian players are very competitive and powerful.”

Mahindra & Mahindra has filed the relevant application with German Federal Cartel office for the acquisition.

Schoeneweiss manufacturers chassis parts, and front axle for commercial vehicles. Its forging capacity is said to be about 40,000 tonnes with 500 people on its roll.
In late September, M&M acquired 68% stake in another German forging company called Jeco Holding AG for an enterprise valuation of 140 million euro.

Jeco Holdings’ forging capacity is 100,000 tons per annum, and it manufacturers gear boxes, engine and axl parts, hubs, gears and piston heads. Jeco’s revenues for 2005 (January-December) was 180 million euros and is profitable entity.  –With Bloomberg