Investment bankers vie for M& A pie
ABN Amro and Deutsche Bank are set to leapfrog up the merger and acquisition (M&A) advisory table in India from the bottom, thanks to Tata Steel’s acquisition of Corus Group Plc for $8.04 billion.
Bankers say Credit Suisse Group which has been cranking up its activity in India this year after a regulatory suspension in 2002, would also use this opportunity to showcase its services after advising Anglo-Dutch steel maker Corus. Tata Steel won approval from Corus on Friday for its takeover bid, which will propel Tata to the position of the world’s number five steelmaker from 56th currently. The biggest ever acquisition by an Indian firm, local or international, has left the big boys of investment banking, Merrill Lynch, Morgan Stanley and Citigroup, battling to retain their positions in India’s increasingly lucrative M&A field.
The Tata group has long dealt with JM Morgan Stanley, the Indian joint venture of Morgan Stanley, and DSP Merrill Lynch, so choosing the Dutch and German banks was unusual. “It was I think ABN’s involvement with Corus’s aluminium business sale,” one banker said. “ABN had known the Corus management and what they wanted, they probably brought both the parties together.”
Corus sold its downstream aluminium business of about $894 million earlier this year, advised by the Dutch bank. The banker said Deutsche Bank had also approached Tata with a proposal for a steel joint venture somewhere in Europe.
Advisory
• The Tatas has long dealt with JM Morgan Stanley and DSP Merrill Lynch, so choosing the Dutch and German banks was unusual
• The deal could push Deutsche Bank to the top of the Dealogic table
• ABN Amro did not even figure among the top 10.It began to make its mark when the Mumbai and Delhi airport privatisations got under way
Another person associated with the deal said both ABN and Deutsche had gone to the Tatas independently. “And Tatas said since both of you are talking something similar, why don’t you work together,” he said. Citigroup and Merrill topped the Dealogic M&A deal league table for India in the first half of the year, with deals worth $2.14 billion and $1.95 billion respectively.
The Tata-Corus takeover could push Deutsche Bank to the top of the Dealogic table by the year-end from 10th in the first half. Previously, ABN Amro did not even figure among the top 10 M&A advisors but it began to make its mark when the Mumbai and Delhi airport privatisations got underway earlier this year.
“With this deal and the $2.5 billion airport privatisation deal, ABN could also end up among the top three in M&A,” the banker said. Some bankers said the Corus deal idea originated within the Tata group itself, with Tata Steel managing director B Muthuraman on the prowl ever since he took charge in 2001.
Tata Steel acquired NatSteel of Singapore and Millennium Steel of Thailand in the past two years, which boosted its capacity by about 3.5 million tonne.
“I don’t think Tatas needed much advice on the deal in terms of the industry and valuations,” said R. Sankaran, a former investment banker for two decades. “It could be that Tatas just wanted funding from these banks, which is why you did not see plain investment advisors.” But moving from two small Asian buys to targeting a company four times its size in revenue terms was an ambitious leap.
—Reuters
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