On Dow Jones Investment Banker: Indian Health Care Sector

10th Jun 2010 22:26

LONDON (Dow Jones Investment Banker)--The following columns have been published exclusively on Dow Jones Investment Banker during the first week of June. Many Dow Jones Investment Banker columns contain spreadsheets, video, PDFs and other supporting material. To arrange access to the best of Dow Jones news and opinion on companies, sectors and deals for investment bankers, please contact [email protected]. To see more, visit: http://www.dowjones.com/banker LANDSCAPE: China -- When You Can Buy But You Can't Own NEW YORK--A spate of recent defaults by Chinese firms with foreign investors, including corn starch and ethanol producer China Sun Bio-chem Technology Group Co. (C86.SG) and yogurt drink maker Hunan Taizinai Group, highlights the legal risks inherent in the structures used by many mid-market Chinese companies to raise capital abroad. (Includes downloadable PDF graphic of offshore fundraising structures.) Contact the columnist: [email protected] THE REMEDY: Indian Health Care Isn't Just Pharma NEW YORK--Big pharma has shoveled money at Indian drug firms over the last five years, seeking high sales growth and low-cost research and manufacturing. There are attractive expansion opportunities for other types of developed-world health care firms, too, but they have been slow to recognize them. When Abbott Laboratories (ABT) agreed last month to pay 7 times sales for Piramal Healthcare Ltd.'s (500302.BY) branded generics business, it may have top-ticked a market that has seen Hospira Inc. (HSO), Sanofi-Aventis (SAN.FR) and Daiichi Sankyo Co. (4568.TO) all pay high multiples for Indian pharma assets. Yet there is more to health care, and health care in India, than drugs. Contact the columnist: [email protected] THE MALL: Seeking Spirits In China After Diageo HONG KONG/LONDON--Diageo PLC's (DGE.LN) convoluted deal to acquire premium Chinese liquor maker Sichuan Swellfun Co. (600779.SH) marks an upping of the ante for the U.K. company's efforts to crack China--assuming regulators give the go-ahead. We have identified other potential targets, although given the nature of the Chinese market it's best not to bank on an immediate flurry of similar deals by international spirits firms. (Includes downloadable Excel spreadsheet of Chinese liquor companies.) Contact the columnists: [email protected]; [email protected] THE REMEDY: Almirall Needs To Look Beyond Europe LONDON--If it's not to fade into obscurity like so many other independent European pharma groups, Spain's Laboratorios Almirall SA (ALM.MC) must move boldly into new markets, build up a new sales presence and consider takeovers. The company faces a triple whammy of problems, and bankers should advise it to act now. Patents on four of its top 10 products expire in 2010, and the entire top 10 will go generic within four years; its lead development project, the chronic obstructive pulmonary disease (COPD) drug Eklira, is mired in a delay. Contact the columnist: [email protected] THE SIGNAL: The Strange, Compelling Logic Of A Google-Nielsen Combo NEW YORK--The Nielsen Co., the global media giant that tracks viewing and buying patterns and has just filed to go public, could be an unconventional yet compelling acquisition target for Google Inc. (GOOG). A deal with the search-engine giant could provide a 100% exit for Nielsen's private equity owners and potentially a better valuation. (Includes downloadable PowerPoint Slide: Rationale for a Google-Nielsen combo.) Contact the columnist: [email protected] TIER ONE: Asian-American Bank Shakeout Is Under Way NEW YORK--After an extended period of explosive growth, U.S.-based Asian-American banks are now scrambling to raise capital and merging with healthier institutions -- the price for poor underwriting decisions and an over-reliance on commercial real estate lending. Foreign ownership rules in some cases, however, are ruling out the most logical investors, making it difficult to predict exactly how the shakeout will play out. (Includes downloadable Excel spreadsheet of Asian-American banks.) Contact the columnist: [email protected] LANDSCAPE: New CEOs Have An Urge To Merge LONDON--Want to know the likelihood that a company will pursue a major M&A transaction? Look to see if it has a new CEO. New corporate chiefs are more likely to pursue big deals than others. And bankers who want to egg them on can point out that the companies whose new CEOs conduct deals in their first year tend to outperform those that are less bold. But there's a catch: You don't want to encourage them to pursue too many deals. CEOs that executed two or three deals in their first year underperformed those that did just one or none. These are the takeaways from a new study from a study by London's Cass Business School called "What Should I Do Next? CEO Succession, M&A Deals and Company Performance." (Includes PDF of the Cass study of CEOs and mergers and a video interview with Prof. Scott Moeller.) Contact the columnist: [email protected] LANDSCAPE: Sector Rotation In Motion LONDON--Defensives in, banks out. A rundown of the 12 month relative high list for Europe contains food retailers, consumer goods and drink manufacturers, while the 12 month relative low list has BP PLC, followed by a whole raft of banks and the occasional commodity group. The result of this sector rotation is that non-defensive IPOs are hard to get away. Contact the columnist: [email protected] TIER ONE: Don't Ignore The Jupiter Risk Factors; Remember Gartmore LONDON--Read any IPO prospectus and you'll find page after page of potential risk factors of which investors should be aware. Jupiter Fund Management's document is no exception and includes a full 10 pages of such warnings. Given the performance of its asset-management cousin Gartmore Group Ltd. (GRT.LN) since its IPO last December, the risk factors should not be flicked through at speed. Contact the columnist: [email protected] THE REMEDY: Venture Debt Financing Comes To Europe LONDON--The idea of debt financing loss-making companies in risky sectors such as biotechnology might seem unsustainable, but that's precisely what Silicon Valley Bank (SVB) has been doing for almost three decades. And now, so-called venture debt financing could grow in importance in Europe, as evidenced by the recent setting up of SVB's U.K. office. Dow Jones Investment Banker caught up with Michael Hanewich, SVB's Boston-based U.S. life sciences guru, and Oscar Jazdowski, who a month ago moved across the Atlantic to the bank's U.K. division. Contact the columnist: [email protected] THE SIGNAL: AT&T Price Move Turns Up The Heat NEW YORK--AT&T Inc.'s (T) announcement that new wireless subscribers will have to pay according to their data usage has major implications for the telecommunications industry. Over time, the move toward metered usage will increase the pricing power of the large carriers and ratchet up the pressure on smaller carriers to consolidate. In addition, VoIP providers like Skype could see a valuation boost. Contact the columnists: [email protected]; [email protected] THE MALL: Screening Buyers For Foster's Beer LONDON--A takeover of Foster's Group Ltd.'s (FGL.AU) beer division is on the cards after the Australian company announced plans to demerge its wine and beer businesses. So, the question now is who could afford to shell out top dollar to gulp the largest freely traded acquisition target that is available in brewing. (Includes downloadable Excel calculator: Bidding for Foster's.) Contact the columnists: [email protected]; [email protected] LANDSCAPE: An Illiquid M&A Market For UK Small-Caps LONDON--Finding buyers for a good house in a good area, shouldn't be a problem. But in uncertain markets, buyers are much more wary, while sellers don't want to sell for depressed levels, lowering sale volumes. It's the same story for small-cap companies. As data from BDO shows, the average U.K. transaction price for TMT deals between GBP50 million and GBP250 million has remained constant for the past three years at around GBP115 million. The number of reported completed deals has fallen from a peak of 20 in 3Q 2007 to four deals in the last quarter, implying a good market for good companies. Contact the columnist: [email protected] THE GRID: UIL Should Stick To Its Electric Knitting NEW YORK--UIL Holdings Corp. (UIL) may have thought it found an easy way to double its rate base, jumpstarting customer growth that has run at just 1% a year. But it would have been better off expanding within a high-return business it already knows -- electricity transmission -- than buying three local gas companies from Iberdrola SA (IBE.MC) for $1.3 billion. The theory behind the purchase was that New Haven, Conn.-based UIL could add 369,000 customers, achieve some back-office synergies and expand geographically, into Massachusetts. This is all fine in principle, but in practice, projected returns in gas are too low to justify branching out of the electricity business. Contact the columnist: [email protected] TIER ONE: Sterling Financial's Ambitious Makeover NEW YORK--Spokane, Wash.'s capital-starved Sterling Financial Corp. has struggled to meet regulators' demands that it raise new capital. But an imaginative recapitalization plan that involves two private equity shops and the former CEO of Bank of America could lay the groundwork for the bank to become a roll-up platform. (Includes downloadable Excel of potential targets for Sterling Financial.) Contact the columnist: [email protected] (END) Dow Jones Newswires June 10, 2010 17:26 ET (21:26 GMT)