More Vodafone-like deals under govt lens

The government has said it will look into more cross-border mergers involving Indian assets, like the Vodafone-Hutchison deal, after the Bombay High Court rejected UK-based Vodafone's petition against the imposition of tax by authorities in India.

"This (Vodafone case) is a test case, we will look at similar cases," Central Board of Direct Taxes (CBDT) acting chairman Sudhir Chandra said on Thursday.

Chandra said more such cases were under investigation. However, he did not name the companies or deals that could be investigated.

Cases pertaining to deals like SABMiller-Foster and Sanofi Aventis-Shantha Biotech transactions may have a direct bearing on the outcome in these cases post- Vodafone court's order.

The second- largest brewer in the world SABMiller had acquired 100 per cent shares in the Indian arm of Australiabased Foster. Similarly, French drug maker Sanofi Aventis had picked up majority stake in Indian vaccine company Shantha Biotech in 2009.

Also, Mitsui Company of Japan had sold 51 per cent interest in Sesa Goa to UK-based Vedanta group in 2007. Recently, Londonlisted Vedanta Group has signed a deal to acquire UK- based Cairn Energy's Indian arm for Rs 3,954 crore.

Chandra said the Income Tax (I-T) department's position stands vindicated.

Tax authorities had slapped a notice on Vodafone over its acquisition of Hong Kong's Hutchison Telecommunications, involving its Indian telecom JV Hutch Essar, for over Rs 51,590 crore in 2007. According to the data compiled by research firm VCC Edge, as many as nine deals have been called off so far in 2010. Corporate India lost Rs 126,630 crore merger deals this year so far.

"The failure of the mega deals was primarily due to valuation concern. Management control issues and strategic unsuitability of the deals was another reason for cancellations," SMC Capitals equity head Jagannatham Thunuguntla said.

The biggest non- starter was that of Mukesh Ambani-led Reliance Industries Ltd (RIL) Rs 680,000-crore bid for LyondellBasell.

This was followed - in terms of deal value - by the cancellation of his younger brother Anil Ambani-run Reliance Communications' (RCom) Rs 50,652- crore merger deal with GTL Infra.

RIL's bid to acquire a majority stake in bankrupt petrochemical group was called off by LyondellBasell after the latter found the offer undervalued the company. The transaction could have been the largest buyout ever made by an Indian firm overseas. So far, Tata Steel's acquisition of Anglo Dutch steel producer Corus Group in 2007 for ` 56,280 crore, is the biggest in Indian corporate history.

The most recent cancellation was of RCom arm Reliance Infratel's ` 56,652- crore tower merger deal with GTL Infrastructure.

Interestingly, the Ambani brothers, who have been most active in merger and acquisition (M& A) activity this year, accounted for over Rs 1.17 lakh crore of the deals that could not take off in 2010.

Deal Trouble:

According to data compiled by research firm VCC Edge, as many as nine deals have been called off so far in 2010. Corporate India lost Rs 1,26,630 crore merger deals this year so far.

SABMiller-Foster: The second- largest brewer in the world SABMiller had acquired 100 per cent shares in the Indian arm of Australia-based Foster.

Sanofi Aventis-Shantha Biotech: French drug maker Sanofi Aventis had picked up majority stake in Indian vaccine company Shantha Biotech in 2009.

Mitsui Company-Vedanta group: Mitsui Co of Japan had sold 51 per cent interest in Sesa Goa to UKbased Vedanta group in 2007.

Vedanta- Cairn: Londonlisted Vedanta Group has signed a deal to acquire UKbased Cairn Energy's Indian arm for Rs 3,954 crore.