| NEW DELHI (August 09) - Godrej has sold off its air | | | | generate the same. |
| care brand, Ambi Pur, to Procter & Gamble for | | | | On the other side of the scale are companies with |
| Euro 40 million. As per reports, under the deal the | | | | surplus cash who are looking for profitable |
| Godrej Group, which had the rights to market the | | | | investments. |
| brand in India till 2012, has relinquished these to Sara | | | | These non-core businesses, perhaps acquired with |
| Lee, which, in turn, will hand Ambi Pur to P&G, | | | | the view to diversify, do come in handy at a time |
| the new owner. | | | | when the companies need to de-leverage. |
| Over the past few months, Indian companies have | | | | To concentrate better on core business: The |
| been on a spree to sell off their non-core businesses/ | | | | spin-offs are also directed at cutting the ‘flab' in |
| assets. These include the country's biggest | | | | order to concentrate on the core competencies |
| conglomerates to mid-sized companies like Piramal | | | | which will enable them to become lean, mean and |
| Healthcare and real estate player Unitech, among | | | | globally competitive. |
| others. | | | | To garner liquidity for investments to boost core |
| Non-core asset/ business sale over the past few | | | | businesses/ fund acquisitions: In addition to the |
| months | | | | increased focus on the core businesses, by divesting |
| Close on the heels of Godrej's sale announcement | | | | their non-core assets the companies are also cutting |
| came the news of Reliance Communications (RCom), | | | | out a drain on their balance sheets. Thereby, they |
| the flagship telecom company of Reliance Anil | | | | are also saving money, which can be better utilized |
| Dhirubhai Ambani Group's (ADAG), approval to dilute | | | | to improve efficiencies in their existing operations as |
| 26% equity in a strategic sale. The stake sale, it is | | | | well as towards acquiring businesses which |
| believed, is to finance future expansion plans such as | | | | complement the core efficiencies. |
| the rollout of 3G mobile services. | | | | Ease the debt burden/ Pay off debt:The trigger for |
| Similarly, GMR Group sold a majority stake in GMR | | | | such hectic activity can be summed up with one |
| Industries, its sugar business, to E.I.D Parry for about | | | | four-letter word: Debt. Debt, that was used—or |
| Rs 110-120 crore in line with its overall strategy to | | | | overused—to make acquisitions big and small, to |
| divest non-core assets and focus on infrastructure | | | | expand operations, and to flag off new ventures. |
| and energy businesses in the future. | | | | Mergers & Acquisitions in April-June 2010 |
| Real estate firm Unitech Ltd, in April said it would spin | | | | According to reports as many as 65 M&A's |
| off its infrastructure businesses including its | | | | were announced in the month of May (Source: |
| investment in a telecoms firm into a separate | | | | VCCEdge), backed by the robust domestic economy |
| company in a bid to unlock value. Similarly, DLF Ltd. | | | | and improving overseas scenario, which has pushed |
| has sold non-core assets worth 2.94 billion rupees. | | | | firms to relook at strategic expansion options. |
| Around the same time Tata Motors announced its | | | | The deal value touched USD 24.8 billion in April-June |
| plans to sell part of its shareholding in Tata Cummins | | | | 2010 taking the total M&A value in the first half |
| JV, a diesel engine joint venture company as part of | | | | of 2010 to USD 48.1 billion, up from USD 16.3 billion |
| the company's plan to raise money to repay debt by | | | | for the whole of 2009. The most targeted sectors |
| divesting its non-core assets. | | | | include telecommunication services, healthcare and |
| Why are companies selling off non-core businesses? | | | | finance. |
| The reasons are many and include the pressing need | | | | Conclusion |
| for liquidity to de-leverage. Sale of non-core | | | | In order to consolidate their positions/ businesses, |
| businesses comes handy for companies looking to | | | | companies not only need to make strategic buy outs |
| ease their debt burden. The spate of spin offs was | | | | but also spin off their non-core operations. It is |
| triggered by the slowdown witnessed in the global | | | | believed that the valuations for strategic M&A's |
| markets. The companies, looking for liquidity had to | | | | are still fairly priced in the current market situation. |
| fall back on the non-core assets/ operations to | | | | |