Mediacom’s turn to try and buy Madison

If a deal is indeed reached, it is unclear if Mediacom and Madison will be merged or remain as separate brands

Mumbai: The on-and-off sale talk over Madison Communications Pvt. Ltd, a large player among India’s dwindling independent media agencies, is heating up again, this time over a potential deal with WPP Group Plc.’s media agency Mediacom Pvt. Ltd.

It is unclear if Madison’s founder and owner Sam Balsara is ready to do a deal now, though, if he does sign off, he is expected to retain a share in the agency, which says it has annual gross billings of Rs1,300 crore and has been coveted by several global advertising and media networks in the past.

Pick and choose: Madison’s founder and owner Sam Balsara Madison.

Balsara did not return telephone and email messages from Mint.

Previous attempts by potential acquirers have often stalled over valuations and it is likely similar issues could yet crop up in Mediacom’s desire to do a deal.

Complicating matters — and valuations — is the fact that one of Madison’s largest clients, the Indian arm of Procter and Gamble Co. (P&G), has put its account for review. If Madison doesn’t retain the business, a potential buyer would be looking at a significant reduction in Madison’s business.

Still, with key big spending brands such as Airtel, Coca-Cola, Cadbury, Tata Tea, McDonalds and Asian Paints, Madison is in the driver’s seat when it comes to doing a deal. It has 15 business units in businesses such as advertising, media, outdoor, public relations, and has some 500 employees in seven Indian cities.

Some media buyers estimate Madison would be valued at Rs100 crore minimum, though Mint wasn’t able to ascertain any valuation discussions between Madison and Mediacom.

At least two people at Madison, neither of whom wanted to be named, said talks between Balsara and Mediacom Worldwide’s global executives, who had recently flown to Mumbai to discuss the deal, have now left the ball in Madison’s court. They add that Balsara appears to be more inclined to sell this time around.

Mediacom’s executives who were in Mumbai recently included its CEO Alexander Schmidt-Vogel; Kevin Clarke, CEO, Mediacom APAC, and CFO Christoph Speck, these people said.

Divya Gururaj, managing director of Mediacom, said there were no company visitors in town and said she had no comment on questions related to a potential deal.

Should Mediacom succeed in buying Madison, it would create significant synergies for WPP’s media buying agency, GroupM, which already controls around 50% of all media spending in India through its centralized media buying unit CTG —Central Trading Group.

Adding a big player such as Madison would easily take this share to more than 60%, note some ad buyers, giving GroupM even more muscle when it comes to negotiating ad purchases from media houses.

If a deal is indeed reached, it is unclear if Mediacom and Madison will be merged or remain as separate brands. Merging the two could help since Mediacom and Starcom MediaVest Group share media planning for P&G India and Madison currently does media buying. While GroupM does planning and buying for P&G India’s rival, Hindustan Unilever Ltd, it is done under a separate media agency, Mindshare.

“This could be the reason why the (potential) acquisition is being done via the Mediacom route as opposed to GroupM directly acquiring it,” speculates one media buyer.

A merger could help reinvigorate Mediacom in India as it saw joint presidents Jasmin Sohrabji and Harish Shriyan move to Optimum Media Direction, the media agency of the Omnicom Group, last year. In doing so, they took accounts such as Parle Agro and Johnson and Johnson with them. Mediacom still handles brands such as Sony, Pampers, Volkswagen, Edelweiss Capital, Dell and Wrigley’s chewing gum.

People familiar with past conversations involving a potential deal for Madison say that Balsara had been approached by other media networks in recent times, including the Aegis Group, which owns media agency Carat Media Services India Ltd, and Starcom MediaVest, which owns media agency Starcom Worldwide. They claim talks with Aegis and Starcom fell apart over valuations that they both saw as too high. Patrick Stahle, CEO, Aegis Media, Asia-Pacific, had previously told Mint that he had been in acquisition talks with Balsara, but had declined to elaborate.

LN Mittal, Fallaron buy into Indiabulls power unit

Billionaire Mittal, who already owns 1.16% of Indiabulls Real, will buy 14.1 % through LNM India Ventures Ltd, while a unit of Farallon would hold 23.4% in Sophia Power Company



Mumbai: Steel magnate Lakshmi Mittal and hedge fund Farallon Capital Management have agreed to buy a total of 37.5 percent for about $400 million in a power unit of Indiabulls Real Estate, the Indian firm said on Friday.

Billionaire Mittal, who already owns 1.16% of Indiabulls Real, will buy 14.1 % through LNM India Ventures Ltd, while a unit of Farallon would hold 23.4% in Sophia Power Company, Indiabulls said.

It also said it was planning to merge Sophia Power with Indiabulls Power Services Ltd, a 100% subsidiary.

Subsequently, Farallon Capital will hold 17.9%in the merged entity and Mittal will own 10.7%, it said.

The company gave no further details, but the Economic Times said in an unsourced report the transaction valued Indiabulls Power Services at Rs55.25 billion ($1.4 billion).

The newspaper paper said Indiabulls Power planned to build power projects with a total capacity of 11,400 megawatts in several Indian states

merger and acquisition

Jaguar buy drives Tata Motors shareholders to exit holdings

Tata Motors Ltd’s pursuit of Ford Motor Co.’s Jaguar and Land Rover luxury units spurred A.S. Thiyaga Rajan to sell 99% of his shares in India’s biggest truckmaker. He isn’t alone in dumping the stock.

The Mumbai-based company is down 11% since 3 January, when it was named Ford’s preferred bidder. Holders such as Alliance Bernstein Japan Ltd and Waddell and Reed Financial Inc. sold their stakes after the overture for UK-based Jaguar and Land Rover was reported in July.

Investors are complaining that Tata Motors may not be able to spend enough in India, the second fastest growing major auto market behind China. The company should focus on the $2,500 (Rs100,000) Nano microcar, not $100,000 Jaguars, said Rajan, who manages $250 million at Singapore-based Aquarius Investment Advisors Pte.

“Integrating the acquisition isn’t going to be easy at all,” Rajan said. “I can’t see an iota of fit in this deal.” He wouldn’t disclose the size of his stake in Tata Motors, which he began accumulating five years ago.

Buying Land Rover and Jaguar may cost Tata Motors $1.7 billion, or four times 2007 earnings, and cut fiscal 2009 per-share profit by 42%, Merrill Lynch & Co. Inc. analyst S. Arun says. Morgan Stanley’s Balaji Jayaraman recommends selling the stock and says it may fall 11% in 12 months.

Tata Motors and Ford, the world’s third largest automaker, are in final talks on a deal to give the Indian company access to advanced engines and powertrains and control of two of the world’s best-known luxury brands after only 10 years of making cars.

‘Very satisfied’

“We are very satisfied with the progress of the discussions,” Tata Motors spokesperson Debasis Ray said, declining further comment.

While 18 analysts including Arun in a Bloomberg survey call Tata Motors a buy, the shares fell 18% in the 12 months ended on Wednesday, while India’s Sensex index rose 45%. Three analysts say to hold and two recommend selling.

The company “will face considerable execution and integration challenges” with Jaguar and Land Rover, said vice-president Elizabeth Allen of Moody’s Investors Service, which said on 4 January it may lower Tata Motors’ Ba1 debt rating. Standard & Poor’s also cited the deal in saying it may cut Tata from BB+.

Credit default swaps on Tata debt have almost doubled to a record since 3 January, according to CMA DataVision in New York. The contracts are used to protect bondholders against default. A rise in price reflects a drop in perceptions of credit quality.

Besides, AllianceBernstein LP and Waddell & Reed Inc., other large sellers include BlackRock Inc. investment managers, which got rid of more than 1 million shares, or 87% of its stake, according to a 10 December filing.

Shutdown costs

“If the acquisition doesn’t fit well with Tata Motors, the cost of shutting it down would be close to $5 billion,” said Gulbir Madan, who manages about $400 million in Indian equities including Tata Motors shares at Neptune Capital Management Llc. in New York.

Ratan Tata, 70, chairman of parent Tata group, rejects suggestions Tata Motors is overreaching by adding luxury brands to pair with Nano—the world’s cheapest car. “We’re not trying to be a global player,” he said in New Delhi on 10 January after unveiling the Nano, which will be built in a new plant costing $249 million. “We will grow internationally in select markets.”

Leaping ahead

Tata Motors, which controls more than half of India’s truck market and about 17% of passenger car sales, has leaped ahead before by acquiring other companies.

Buying South Korea’s Daewoo Commercial Vehicle Co. Ltd in 2003 enabled the company to produce trucks with as much as 400 horsepower — more than twice what it had been building, and enter the very-heavy truck segment.

“On their own, Tata would have taken years to get this technology,” said analyst Amit Kasat of Motilal Oswal Securities Ltd in Mumbai, who rates the shares as a “buy.”

Still, success with Jaguar and Land Rover would buck recent history in industry buyouts.

Germany’s DaimlerChrysler AG lost $12.6 billion in market value during its nine-year ownership of Chrysler Llc. before selling 80.1% of the US automaker to Cerberus Capital Management LP last year.

Ford has tried for 21 years to boost earnings, but Jaguar was never consistently profitable following the 1989 buy. Ford bought Land Rover in 2000.

Tata Motors’s interest in the U.K. units “seems odd, given their historic focus on mass cars for the cost-conscious,” said Devan Kaloo, who helps manage $9 billion for Aberdeen Asset Management Ltd in London.

The Ford deal “potentially will be value destructive,” said Kaloo, who doesn’t own the stock.

Investors shouldn’t be distracted by enthusiasm in India for a domestic takeover of two UK brands whose roots date to the days of British colonial rule, Rajan said.

“Patriotic ebullience doesn’t rub off on the shares,” he said.

Pooja Thakur in Mumbai and Subramaniam Sharma in New Delhi contributed to this story

Ess Dee Aluminium to revive and acquire India Foils

The acquisition of India Foils’ 19,000 tonnes per annum capacity would boost Ess Dee’s capacity to about 39,000 tonnes per annum

Mumbai: Packaging material maker Ess Dee Aluminium Ltd said on Monday it plans to acquire majority stake in India Foils Ltd, after helping revive the sick unit, to help boost capacity.

In a statement to the stock exchange, Ess Dee said it will join hands with India Foils founders, Madras Aluminium Co Ltd, to revive the company through a rehabilitation scheme, permission for which is expected within the next 60-90 days.

It plans to acquire 90% in India Foils for about Rs1-1.5 billion once it comes out of the purview of the Board for Industrial & Financial Reconstruction (BIFR), Ess Dee chairman and managing director Sudip Dutta told a business news channel.

The acquisition of India Foils’ 19,000 tonnes per annum capacity would boost Ess Dee’s capacity to about 39,000 tonnes per annum, he added.

Madras Aluminium, a Vedanta group firm, currently holds a 38.8% of India Foils.

Ess Dee shares were trading 2.25% higher at Rs626, off a high of Rs680, while India Foils shares rose by their daily maximum limit of 5% to Rs16.40 in a weak Mumbai market.