Blackstone Advisors exits small-cap stocks

US-based Blackstone Advisors, a leading foreign institutional investor (FII), is exiting some of its small-cap stocks in India, including more than half of its stake in Indo Tech Transformers. Blackstone is selling the stakes in these companies through its Asia and India funds. A senior executive of Blackstone Group said the company has decided to sell stakes to raise cash for various distributions. “Also, we might find other, more attractive names that we need to rotate into. Some sales can also be due to company-specific reasons,” the official said.It is not known whether Blackstone is making profit from the sales, though it is clear that share prices of all these companies have come down significantly in the past one year.In the case of Indo Tech Transformers, the US fund house had bought 86,871 shares on October 27 at Rs 169.90 a share. It has sold nearly three lakh shares in the company in three transactions at an average price of about Rs 302 a share.“The total cost of investment may be higher. The buying seen in October may have been to average the cost,” said a stockbroker. At present, shares of Indo Tech Transformers is about 34 per cent down from their one-year high of Rs 590 in April last year.Prices of Blackstone’s other small-cap holdings have also come down. HBL Power Systems is down to Rs 132 a share from Rs 330 in May last year. Blackstone has liquidated 3.27 lakh shares of the company.In the quarter ended December 31, 2008, Blackstone held 2.72 per cent equity stake (6,60,000 shares) in HBL Power Systems. Blackstone’s name, however, does not figure on the shareholders’ list for the March 31, 2009 ended quarter, indicating that the fund house’s stake has come down to less than 1 per cent.In Sujana Tower, Blackstone, through the India Fund, held 6.20 per cent stake (2,570,767 shares) at the end of December quarter. Last month, the company sold a part of the stake at a paltry Rs 8.44 per share, against the 52-week high of Rs 132.70 on April 22 last year. Octav Investments is another stock from which Blackstone has partially exited. In the October quarter, the fund held 1.56 per cent stake (46,997 shares) in the company, which has now come down to less than one per cent. Share price of the company is at present quoting at Rs 13.32 compared with Rs 650 on August 8 last year. “Our strategy has not changed. We have more exposure to large-cap names and keep some exposure to mid and small-cap names that we believe have the most potential,” the Blackstone official said. Blackstone India Fund’s top 10 holdings at the end of March 31, 2009 include Reliance Industries, Infosys Technologies, Bharti Airtel, Hindustan Unilever, ITC, HDFC, ONGC, BHEL, HDFC Bank and State Bank of India.

Source: Business Standard, Team M&A

Another global parmaceutical company up for sale - This time it is Stiefel Laboratories

Consolidation in global pharmaceutical industries now gathers stem. Stiefel Laboratories Inc., a closely held pharmaceutical maker, is considering selling itself in a deal that could be worth several billion dollars, according to people familiar with the matter.

The potential sale has drawn interest from a number of major drug companies, including Johnson & Johnson, Novartis AG and GlaxoSmithKline PLC, these people said.
Stiefel, which makes anti-itch creams, acne treatments and other dermatological remedies, is hoping to fetch somewhere in the range of $3 billion to $4 billion, according to these people.
A spokeswoman for Stiefel said the company's board has not decided to sell the company and hasn't received any offers. "Like any business, if we received an offer it would be carefully considered," the spokeswoman said in an email.

Stiefel has been controlled for more than 160 years by the founding Stiefel family. Private-equity group Blackstone Group LP, which invested $500 million in the company in 2007, owns a substantial minority stake. Stiefel, founded in Germany in 1847 and now based in Coral Gables, Fla., has annual revenue of about $1 billion, according to a person familiar with the company. Little financial information is available about Stiefel because it is privately held.
Stiefel has entertained offers in the past, but the recent spate of drug deals has renewed interest in the company.

Big pharmaceutical companies, faced with the pending expiration of patents on major drugs, are trying to diversify their businesses. Dermatology and the broader "aesthetic medicine" market is one they are increasingly interested in because of the aging global population.
But the economic downturn has tempered demand for many of these products and hit the share prices of some companies in the field. Medicis Pharmaceutical Corp., another maker of skin products, has seen its shares drop about 40% over the past year, for example.
After several generations of ownership, it's not clear why the Stiefel family would want to sell in such an environment.

Charles Stiefel, the company's chief executive and chairman, has expanded the company in recent years through several acquisitions. Stiefel paid about $605 million to acquire Connetics Corp., a drug company specialized in dermatology, in 2006. Last year, Stiefel bought Barrier Therapeutics Inc. for about $150 million.

Blackstone Buys 10.38% Stake In Allcargo Global

The world's biggest private equity firm, Blackstone Group is all set to invest around Rs 240 crore to purchase 10.38% stake in Mumbai-based logistics firm Allcargo Global.
Besides, the US-based company has also expressed its intention to buy another 4.61% of the enhanced paid up equity from the open market.
Allcargo will issue 1,000 equity shares and 1,081,081 fully and compulsorily convertible debentures (FCCD), convertible into an equal number of equity shares, at Rs 934 each to Blackstone.

The company will also issue 1,513,514 warrants, convertible into equal number of equity shares at the choice of the investors from the date of issuance, between Rs 934 and Rs 1,284 per warrant.

Shashi Kiran Shetty, Allcargo Chairman and Managing Director said, “With their global reach and a pro-active approach, they bring immense value to the company. This investment will allow us to execute our organic and inorganic growth plans and continue to strengthen our leadership position in the logistics space.” Blackstone Advisors India Chairman and Managing Director Akhil Gupta stated, “We are confident that the Indian logistics sector will experience significant growth in the coming years. India is seeing buoyant economic growth, improvements in infrastructure and a rationalisation of the country’s tax structures and Allcargo is an ideal platform for Blackstone to be in this highly attractive sector.”

PE firms eye a slice of Bombay Dyeing

A clutch of leading private equity giants such as Blackstone are in the race to acquire a minority stake in Nusli Wadia’s Bombay Dyeing. There is growing buzz in the market that the Wadias are looking at shedding less than a 15% stake to private equity funds.

People close to the situation said that Bombay Dyeing, which needs money to expand its real estate and airlines business, along with its planned forays into retail, may consider the private equity route as one option for raising money.

A Bombay Dyeing spokesperson categorically denied any plans to rope private equity investors into the company. When quizzed if private equity giant Blackstone is the frontrunner, a senior executive of the company said: “We have not even had a cup of coffee with anyone in Blackstone at any level.” Akhil Gupta, chairman and managing director of Blackstone India, said: “We have signed confidentiality agreements with several people. I cannot comment on the individual specifics of the deal.”

People close to Bombay Dyeing say that the Wadia family, which has never shared equity with outside investors in any of its old core companies, will have the final say in determining the transaction’s success. The deal may not happen if the terms are too onerous or if the Wadia family feels that money can be easily obtained through other means such as a rights issue.

It seems the markets are already abuzz with all the deal-talk. Bombay Dyeing shares rose 2.28% on Wednesday to close at Rs 628.45. The shares have gained 8.75% over the week and 14.27% over the past month. A deal at currently market price will fetch the company about Rs 400 crore. The firm’s market value is is now at about Rs 2,424 crore.

The fund infusion in the company - through a private equity deal, a rights issue or any other means of financing - is expected to help Bombay Dyeing revamp its textile business and develop its real estate properties. The firm plans to invest Rs 1,500 crore in developing a slew of real estate projects in Mumbai. Bombay Dyeing, once a strong player in the textile business, suffered when DMT, its main product, was overtaken by PTA as the main raw material for the polyester industry. Add to that, insufficient growth in the fabric and garment business and its sales fell to Rs 507 crore for the year ended March while profit nearly halved to Rs 35 crore.

(source: Economic Times)

Private equity funds need level playing field in India to grow

Although 2007 is likely to be another landmark year for private equity (PE) in India, the level of PE activity, currently estimated at around $10 billion, could increase and needs to increase multifold given India’s current GDP growth.

To achieve this, regulations and taxes need to improve and the PE community needs to project itself in the market that it is a source of finance that contributes to the growth plans of entrepreneurs, helps generate employment and improves corporate governance.

Having said this, PE financing is steadily gaining more acceptability amongst Indian promoters. This indicates a ‘leap of faith’ for closely-held traditional Indian family-owned and managed businesses, which until a few years ago, had viewed private equity financing as a possible interference in their business.

The recent investment by Blackstone in Bangalore-based garments company Gokaldas Exports demonstrates this leap of faith. Blackstone has acquired a controlling stake from the owners.

This transaction symbolises a traditional promoter-family run business partnering with a large private equity fund to accelerate its growth plans. This transaction demonstrates that Indian promoters are recognising the value that a PE brings to the partnership and PE investors are being viewed as ‘partners’ to the business.

In the backdrop of increasing competition for deals, some PE funds bring immediate value to Indian promoters at the negotiating table. For example, in the BPO industry, value is brought to the negotiating table by offering to introduce existing US or Europe-based investee companies who could be interested in offshoring, thereby providing an immediate growth opportunity to the Indian business.

Since 2002, PE inflows to India have witnessed a compounded annual growth rate of 67%. PE inflows during the first seven months of 2007 stood at $6 billion, which is already close to surpassing the $7.9 billion invested during the whole of 2006. However, what is more important for

PE is that the past two years have confirmed that the Indian market provides the liquidity to help PEs exit from their investments. Reports suggest that between January 2004 and June 2007, PE and venture capital funds exited 160 companies, 110 through sales and 50 through IPO.

(source: Economic Times)

Five PEs line up for 15% in LIC credit card arm

Blackstone, JC Flower, Fortress, Temasek and 3i in talks with LIC

Global private equity investors Blackstone, JC Flower and Fortress of the US, Temasek of Singapore and 3i of the UK are in talks with the Life Insurance Corporation of India (LIC) for buying a combined 15 per cent stake in the life insurer’s proposed credit card venture with US-based GE Money.

The valuation of the proposed company is still to be worked out. LIC will own a 40 per cent stake, GE Money India 30 per cent and Corporation Bank, LIC Housing Finance and LIC Mutual Fund 5 per cent each.

(Source: Business Standard)

Blackstone eyes 30% in nuclear tech firm MTAR

US private equity (PE) giant Blackstone is learnt to be close to picking up a 25-30% stake in Hyderabad-based nuclear and space science components company MTAR Technologies for around Rs 300 crore. If the deal goes through, it will possibly be the first PE investment in the defence and nuclear space in India.

The privately-held MTAR makes critical components and products for nuclear reactors. The transaction, which comes in the backdrop of the Indo-US nuclear deal, is taking place in a company which was subject to US sanctions following India’s nuclear tests of 1998.

MTAR is believed to have high profit margins and it is said that PE major Carlyle too was interested.

(Source: Economic Times)

PE biggies line up for ICICI pie in Infomedia

Private equity funds General Atlantic, Blackstone and Warburg Pincus have shown interest in ICICI Venture’ 63% stake in Infomedia (formerly Tata Infomedia), the publisher of business directory Yellow Pages and some well-known niche magazines.

Given the fact that whoever buys the stake will have to make an open offer and also pay a controlling premium, the buyer should sell out upwards of Rs 400 crore. Infomedia’s market capitalisation is Rs 474 crore and its shares closed at Rs 240 at the BSE on Wednesday.

When contacted, the ICICI Venture spokesperson said, “We don’t comment on market speculation.” Infomedia India CEO Prakash Iyer could not be reached despite repeated attempts.

ICICI Venture acquired Tata’s 50% stake in Infomedia India in 2003 for Rs 123 core. It later acquired an additional 13% through an open offer.

Infomedia, with annual revenues of Rs 143 crore, is best known for its business directory service, the Yellow Pages. Tata Press, when it owned Infomedia, launched the Tata Press Yellow Pages in Mumbai and soon took the Yellow Pages culture to more than 20 cities across India.

An industry source pointed out that PE firms have shown interest in the company for its publishing outsourcing business and the growth it offers. The size of the publishing vertical in the BPO space is around $250 million.

Infomedia entered this business in December 2005 through the acquisition of Bangalore’s Cepha Imaging Systems and UK-based publishing company Keyword Group. The idea was to scale up operations, forge partnerships with international publishers and take advantage of India’s cost structure.

(source: Economic Times)

Private equity firms invest record $3.8 bn in India

Global private equity firms, including Blackstone and Carlyle Group, have made an investment of $3.8 billion in 2007 so far in the country, up 50 per cent from the year-ago period.

The record volume has been reached through 81 M&A deals. Last year, foreign private equity players had invested $2.6 billion, data compiled by global consulting firm Dealogic showed.

Carlyle Group is the leading "financial sponsor" in India with investment of $777 million via two deals, including acquisition of over six per cent stake in HDFC.

It is followed by Dubai International Capital, which acquired a 2.87 per cent stake in ICICI Bank for $741 million, and Blackstone Group with $619 million inflow via eight deals.

Financial sponsor is a term commonly used to refer to private equity investment firms, particularly those engaged in leveraged buyout transactions.

Blackstone Group, the world's leading private equity firm, has acquired stake in companies such as Intelenet Global Services, Punj Lloyd and Gokaldas Exports.

The US-based Group has also decided to pump in $150 million to acquire a stake in Nagarjuna Construction Company. A move that comes close on the heels of its decision to acquire up to 70.1 per cent stake in Gokaldas Exports, the country's biggest apparel exporter, for about Rs 675 crore.

Blackstone Group manages around $90 billion of assets worldwide. In January, it invested about $275 million in Ushodaya Enterprises Ltd (UEL), a media and film production company owned by Ramoji Rao.

Source: (Economic Times)

Blackstone to invest $150 mn in NCC

Yesterday's news.

Blackstone Group, the global private equity firm, will buy a 14.5 per cent stake in Hyderabad-based Nagarjuna Construction Company Limited (NCCL) for $150 million (about Rs 615 crore), one of the largest-ever foreign investments in the construction sector in India.

Blackstone will buy equity in two tranches, through an allotment of 20.24 million equity shares of Rs 2 each at a premium of Rs 200.50 (equivalent to about $100 million) and 9.1 million warrants (with an exercise period of 18 months) of Rs 225 a warrant, with each warrant convertible into a equity share of Rs 2 each at a premium of Rs 223 (equivalent to about $50 million).

Nagarjuna Construction intends to use the funds for additional investments in public-private infrastructure projects and to expand its capital base, which would help it bid for larger projects and strengthen its position in the market.

This is one of the largest investments by Blackstone in the construction sector.

This is the fourth deal by Blackstone in India this year. The company acquired majority control in Gokaldas Exports for about Rs 660 crore, the largest management buyout in the textiles industry.

It has invested $275 million in Ushodaya Enterprises, which runs the Eenadu newspaper and ETV franchise, and also had another management buyout of BPO firm Intelenet from Barclays and HDFC for Rs 840 crore.

(Source: Business Standard)

Blackstone buys 50% in Gokaldas

Blackstone Group, among the world largest buyout firms, has accelerated its investments in India, pulling off on Monday its second buyout deal in less than three months by picking up a 50.1% stake in Gokaldas Exports Ltd, the country’s largest garments exporter, for $116 million or Rs482.5 crore, and setting aside another $49 million for an open tender mandated under local securities laws for an additional 20% of the target’s shares.

The holding of the promoters in Gokaldas Exports, the Bangalore-based Hinduja family (not related to the Hinduja Group) will come down from 70.1% to 20% before the open offer.

Blackstone said on Monday that it sees large opportunities in the garments outsourcing business and expects firms from its overseas portfolio and extended network to outsource manufacturing to a 400-acre so-called special economic zone that Gokaldas is setting up at Kanakapura outside Bangalore. “We are associated with a large network of retailers through our global portfolio of investments who may want to outsource to India,” said Akhil Gupta, managing director of Mumbai-based Blackstone Advisors India Pvt. Ltd.

Companies running operations from special economic zones or SEZs enjoy several incentives. The Gokaldas SEZ, expected to employ around 50,000 people, will house units of several garment manufacturers. The company will have a unit that will employ around 4,000 people in the SEZ.

“More companies will outsource (to) us,” said Rajendra Hinduja, managing director of Gokaldas Exports, referring to the benefits of the sale. “We will get access to textile companies in the US that have investments from Blackstone.” The names of such companies were not immediately available. Gokaldas earns more than 96% of its revenue from exports to global brands such as Tommy Hilfiger, Nike and Adidas, and to large retailers such as Walmart Inc. and Gap Inc.

Blackstone, which will pay Rs275 per share or a premium of 25% for the shares of Gokaldas, had initially prospected the Bangalore target as a ‘growth deal’ with the intention of acquiring a minority stake. Blackstone has invested $525 million, excluding Gokaldas, in India till date and intends on deploying $2 billion in the next two years.

(Source: Live Mint)

Intelenet sold in country’s largest management buyout

In the largest management buyout (MBO) in the country, the management team of BPO firm Intelenet, backed by PE firm Blackstone, has bought out the existing promoters, Barclays Bank Plc and HDFC. Under the terms of the deal concluded on Sunday morning, Blackstone will hold 80% in the firm and employees, including the current management team, will hold 20%.
Sources pegged the value of the deal in the region of $200 million. ET had reported the value of the deal and that Blackstone was close to clinching it on Saturday. No official confirmation was available on the deal value, because Blackstone is in the silent period. Around 300-400 employees in the senior management of Intelenet will become shareholders in the firm once the transaction is completed

The deal values Intelenet at over two times its FY07 sales of around Rs 380 crore, compared with the over 3x sales valuation of EXL (March 07 annualised) and WNS. In terms of the employees, the 6-year-old firm is the third largest thirdparty BPO firm in the country with around 17,000 employees.

Interestingly, Barclays, which will now exit firm as a shareholder, will continue as a ‘long term’ client for the businesses it currently outsources to Intelenet. It will also set up its own captive in the Delhi with the help of the Intelenet management team. HDFC, which was one of the original promoters, seems to have taken a strategic decision to exit the firm, unlike ICICI which took its BPO firm — Firstsource— to IPO this year. The value of HDFC stake has increased nearly three times since 2004. In 2004, Tata Consultancy Services’ 50% stake in Intelenet got it $35 million.

(Source: Economic Times)

Yash Raj Films, Blackstone JV likely

Filmmaker Yash Chopra is believed to be engaged in talks with private equity investor Blackstone to form a joint venture for movie exhibition initiative. The movie exhibition business will strengthen Yash Raj Films’ presence in the media and entertainment space.

Chopra is planning to buy single-screen theatres and convert them into multi-screen theatres, depending on their viability. The new business is unlikely to operate under the Yash Raj Films banner. Yash Raj Films, the production house owned by Chopra, has already acquired two properties in Mumbai, Bahar Cinema in Andheri and Capitol Cinema in south Mumbai, according to sources. The production house is also looking at other metros, including Kolkata, Ahmedabad, Hyderabad and Bangalore.

Formed in 1970, the production house has come a long way from running a studio to distributing movies. It launched the music label called Yash Raj Music some years ago. The company also produces DVDs under the Yash Raj Films Home Entertainment label and started movie distribution last year with the Bollywood film, Krrish, followed by Kabhi Alvida Naa Kehna.

(Source: Business Standard)