B&E this fortnight

Delicious divorce!
How can divorces be delicious? For starters, Cadbury Schweppes plans to bring in Cadbury plc as its new identity once its separation is complete. Strategically, the company will take up a cost reduction initiative to ‘focus on fewer, bigger and more value-creating initiatives’ and ‘significantly reduce complexity across all aspects of the business’. Cadbury now plans to close 15% of its manufacturing sites globally while reducing 15% of its labour force. This is to achieve mid teen percentage margins by 2011, from the 10.1% in 2006. Over the next four years, the company aims to abridge its organisational structure for better execution of a focused commercial strategy. It was in March 2007, that Cadbury announced its plans to split Americas Beverages and confectionery, and of late confirmed that a ‘sale is the more likely expected as a outcome’. While showcasing tremendous confidence, the company believes that both the businesses have enough potential to operate in independent ways. On this cost reduction programme spanning 2007-2011, the estimated investment has been decided at $895 million, of which $99.4 million will be non-cash. Furthermore, the company has also restructured its confectionery business, with Britain, Ireland, the Middle East and Africa (BIMA) forming one part, while Americas, Asia Pacific and Europe (rest) representing the other.

Boyd’s underestimation dilemma!
Boyd Gaming Corporation has recently updated the cost of its Echelon mega resort on the Las Vegas Strip, to a whopping $4.8 billion. It went up from a formerly expected figure of $4.4 billion. Furthermore, the company’s equal JV with Morgans Hotel Group will result in Delano and Mondrian hotels costing $950 million, this is a full $250 million more than the earlier estimated cost. Boyd Gaming on the other hand unveiled plans for developing a 300,000 square-foot retail path with General Growth Properties. The project overshot to $500 million when it was intended to cost just over $400 million earlier. All expectations seem to go ballistic for Boyd!

L3 outbids mighty Raytheon…
L3 Communications Holdings has been granted a $2.04 billion contract by Pentagon. L3 would provide tactical transport aircraft to service the US Army as well as the air force. L3 along with Italian partner Finmeccanica SpA’s subsidiary Alenia North America Inc., Boeing Co. and Global Military Aircraft Systems had outbid Raytheon. Massachusetts based Raytheon had partnered CASA, a subsidiary of European Aeronautic Defence & Space Co. NV, (EADS). L3 would build 78 C-27J Spartan cargo planes, which would replace C-23 Sherpa, C-36, a few C-12s and other established transport aircraft s like Boeing’s CH-47 Chinook.

Google’s spoilt party!
eBay has decided to go offline from the US network of Google’s AdWords, signaling the fading relations between the former partners. AdWords is the major source of revenues for the search engine company. The online auctioneer justifies this move as a continual initiative to look at their marketing across different media channels. Sources however believe that Google’s announcement of Checkout Freedom Party was the primary source of disdain. Competitor eBay Live, apparently launched the same day, is a conference where different sellers on the site meet. Though Google has cancelled the party, the two internet giants are not comfortable with each other’s competing products. A rapprochement is now awaited though.

Ford Motor’s unending odyssey?
Ford said that about 27,000 of the union workers who acknowledged the buyout offers have gone away from the company, till now. Nearly 37,000 United Auto Workers (UAW) union employees had accepted Ford’s offer as part of the company’s ongoing reformation process. The automaker, which recorded a record loss of $12.7 billion in 2006 and a loss of $282 million for the 2007 first quarter, is planning to bring about an immense change. For this, Ford is in a four-year turnaround plan aiming to slash 16 plants and up to 45,000 jobs. Ford has however revealed that it has about 700 workers assured of nearly full wages and benefits when the automaker eradicates work or closes factories.

Bain strikes the right notes!
Bain Capital Partners, a Boston based private equity firm, finally got consent to acquire The Guitar Center, the biggest retailer of musical instruments in the U.S. The deal has been sealed at $1.9 billion and assumes the debt of $200 million which will drive the transaction to $2.1 billion. Bain Capital has also promised a premium of 26% at $63 per share to the shareholders of the retail firm. Guitar Center believes that Bain Capital has a successful track record and investment experience and the deal would be of interest both, to the company and the stockholders. Guitar Center has hired Goldman Sachs & Co. to proceed with the auction. The deal is expected to close by fourth quarter.

WPP’s advance booking syndrome...
GroupM, the media buying agency of WPP Group is buying advertising time valued at around $1 billion from NBC Universal’s television as well as digital properties. It involves both day time and prime time programming. Bravo (the cable property of NBC), Spanish language programming and Internet sites are also covered by the agreement. Last year there had been confusion on the structure of the deals as previously the deals for the commercial time were based on the number of viewers. Since the introduction of DVRs, broadcasters as well as advertisers had to rethink. Nielson Media thus introduced live plus three, a rating method that tracks viewers watching commercials both live and on DVR. Supposedly, the NBC– Group M deal is based on this particular rating method.

Say’ING hello to Turkey...
ING, the Dutch financial services giant proposes to enter the Turkish banking sector by investing $2.67 billion in cash to acquire Oyak Bank. It was also planned that the financial bigwig would invest swiftly for extending its footprint in terms of market share by opening more branches, improving marketing and escalating internet banking. The Dutch banking group while continuing to focus on its core strengths of pension and emerging markets, had till now opposed large acquisitions. Last year’s ABN Amro fantasy, a Dutch banking rival now in the middle of a takeover, changed all that though.

Kellogg: Not for children under...
Kellogg Company, popularly known as Kellogg, has decided to block marketing of certain products to children. The voluntary initiative would see the introduction of ‘front of pack’ nutrition labelling. As per Kellogg Global Nutrient Criteria, a new internal standard, the company would adhere to certain norms while deciding what and how to market to children via all the channels. According to the company, ‘those products that don’t meet the criteria (which is almost 50% of Kellogg products currently marketed to children worldwide) will either be reformulated to meet the ‘Nutrient Criteria’ or they will no longer be marketed to children under twelve by the end of 2008.’ Later in 2007, the company would introduce Guidline Daily Amounts (GDAs) in the US, Canada and Mexico on the front labels of ready-to-eat cereal packages on sale.

GM’s diesel way to trucks!
General Motors Corp. has announced that the company plans to spend $100 million in its engine plant in Tonawanda, New York, for making a new diesel engine for light duty trucks, to enhance fuel efficiency by 25% and reduce carbon-dioxide emissions by 13%. The auto giant said it will make the 4.5L V8 engines for North American pickup trucks and the Hummer H2 built after 2009. This revelation came at a time when GM, well known for its dependence on gas-guzzling SUVs, tries to bring about an image makeover and improve badly hit sales.

Pharma revenues set to double by 2020!
As predicted by PricewaterhouseCoopers (PwC), by 2020 global pharmaceutical market would witness a sales doubling to the tune of $1.3 trillion. Reasons like ever increasing population, obesity and preventive treatments will attribute to this doubling of sales. Interestingly Brazil, China, India, Indonesia, Mexico, Russia and Turkey would hold one-fifth of these revenues. As per the report however ‘the current pharmaceutical industry business model is both economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets’. PwC proposed that to tap the potential markets, the industry should definitely undergo certain elementary changes in the manner it operates.

The new bourgeoisie Moscow!
Is Moscow only for the rich to enjoy? As per a survey conducted by Mercer Human Resource Consulting, the city finds itself on the top of a list featuring the world’s most expensive and luxurious cities. Moscow was one among 143 cities covered in the survey. The escalated cost of living was due to the appreciated trouble and the ever-increasing housing costs. The survey’s base city was North America’s New York. Based on this data, it concluded that emigrants living in the Russian capital paid almost 35% higher. Backed by a strong British pound and high rental prices, the second place was bagged by London, revealing that it was 26% more expensive than New York.

HLL ‘Lever’ ages the power of Hindustan
In tune with its global identity, FMCG giant Hindustan Lever Ltd. (HLL) has finally re-christened itself as Hindustan Unilever Ltd. (HUL) after getting the government nod. The name change episode can be traced back to December last year when rumours started floating around about its probable name change. In February this year, the name change got the board of directors’ approval which was followed by shareholders’ approval in May 2007. The new name asserts the equilibrium between the company’s heritage in the country and the desired global alignment with its corporate brand ‘Unilever’. After much deliberation, the name Hindustan was retained in the new name, keeping in mind that India plays a vital role in Unilever’s scheme of things. Hindustan has been integrated in the new name to authenticate its commitment to the country’s economy, people, partners, employees et al. The company has also released its new logo which is being publicised through massive campaigns. The new logo carries Unilever’s statement of ‘adding vitality to life’. It incorporates the ‘U’ of Unilever that comprises of 25 different vitality icons and has the name Hindustan Unilever Ltd. inscribed at the bottom. According to the company officials, the corporate name will enhance Unilever’s global scale operations which will in turn benefit the Indian business locally and globally. However the stock markets were not very gung-ho about the change as company’s stock dipped by 1.64% to reach Rs.189.20 after the company announced its new identity in the country.

Calling off the ‘Spice’y Idea!
The merger deal between Idea Cellular and Spice Telecom that could have paved the way for consolidation in the telecom sector has been called off due to disparities in price. Idea, present in 11 circles out of country’s 23, was eager to expand its footprints in terms of its subscriber base, but retraced its steps because of the price being demanded by Spice Telecom. It’s learnt that Spice was citing roughly twice the value of the company, which was deemed unrealistic by Idea. According to officials there is no question of reviving the talks even after the Spice IPO hits the market.

Blackstone buys out Intelenet
Blackstone has bought HDFC and Barclays’ stake in Intelenet for nearly $200 million. A Special Purpose Vehicle (SPV) has been launched for acquiring the stake. Blackstone would now hold 80% stake in the BPO operator. The board of Intelenet will now have two representatives from Blackstone India and two from Blackstone New York. However, as per the agreement, the management team of Intelenet would continue to lead the BPO and Intelenet would carry on providing services to its clientele including Barclays. Industry experts are of the opinion that this buyout is the largest Management Buy Out in the BPO sector.

A Fair and Handsome deal
He created storm in a bath tub by endorsing Lux a couple of years back, now the Badshah of Bollywood, Shahrukh Khan has surprised everyone by agreeing to endorse Fair and Handsome cream, a fairness cream for men. Khan has been signed for two years by the Rs.15 billion Group. Emami aims to extensively promote this new relationship across all media. Khan also endorses Navratna Oil and Sona Chandi Chyawanprash from the Emami stable. Brands that are being endorsed by King Khan contribute around 25-30% to Emami’s annual growth. This year, the Group plans to introduce 18 new products in various categories.

Honda gets the power of 100
An India specific 100cc motorcycle is being developed by Honda Motorcycle Scooters India (HMSI). The bike which would be priced slightly higher than the existing bikes in the segment would hit the roads in the next three years. HMSI is not mulling a second plant for the purpose as the new bikes would be produced from its existing Manesar facility. Earlier HMSI had announced Rs.4 billion investment for marketing, product development and capacity expansion (from its current 900,000 to 1,200,000 units per year). The company is also planning to launch a bike in the 125cc segment.

Delhi to sip Starbucks first
Delhi is scheduled to be the first city to get a Starbucks outlet. This iconic American coffee chain has taken up a 2,000 sq. ft . area in the city’s Saket’s Select Citywalk, an expensive mixed use development area that will be operational in August. The $7.8 billion coffee retailer plans to stay in Delhi in the first year with five openings. It expects to set shop in the Delhi by October this year. Starbucks’ strategies would, of course, be dependant on the go-ahead from the government. The coffee retailer’s request to FIPB, was earlier rejected owing to lack of lucidity on the foreign shareholding pattern of the proposed Indian venture.

Taking Taj to places...
The hospitality industry will see more inflow of funds as Taj Group of Hotels will invest about Rs.10 billion for developing four hotels in Bangalore. Sumit Guha, Vice President-Development, Indian Hotels, owners of the Taj Hotels chain expressed his views as “We will invest around Rs.10 billion for building four hotels in Bangalore, of which two are already under construction, while the ones in Devanahalli and Yashwantpur will take three years to complete”. Beyond domestic presence, the Group is also foraying into overseas market in Maldives, Mauritius, Colombo, Boston and Sydney. The company has also expressed interest in modernisation of Delhi airport and to build a hotel in the national capital.

The Man of Steel gets his hands in Oil
After becoming the country’s Steel baron, L. N. Mittal has set his eyes on oil. Taking an exception to the current 26% FDI limit in public-sector petroleum refineries, government gave green signal to Mittal, allowing him to pick up 49% stake in Bhatinda refinery of HPCL for Rs.33.65 billion. The stake in the state run refinery with a capacity of nine million tonnes per year is being acquired through Singapore- based Mittal Energy Investments. The deal marks Mittal’s foray into the oil sector and is also the largest FDI in the PSU refining sector. Land of Uncle Sam; worth $2 billion Indian investments in the US have touched the $2 billion mark in 2006-07. The IT and the ITeS sectors accounted for 48% of the total deals. The investment figure is likely to go beyond $10 billion by 2010. Motivated by factors like greater profitability, cost advantage and a moderate regulatory atmosphere promoted by the government, a total of 48 overseas deals were inked in 2006-07. Also, many small and mid-sized deals contributed somewhere between $20-60 million. A joint study by FICCI & Ernst and Young predict better activity in this sector.

ICICI hai na!
In what can be called one of the largest IPOs to hit the Indian bourses, ICICI Bank recently indulged in share sale and raised Rs.175 billion (the offer and American Depositary Receipts contributed equally to that figure). Moreover, the bank is mulling exercising the green-shoe option and raising another Rs.26.25 billion. The issue was oversubscribed two times within two hours of its listing and 11.5 times in total. SBI has put in a $1.3 billion bid for its FPO. According to K.V. Kamath, CEO, ICICI Bank, the money raised from the issue will help ICICI to augment the bank’s lending portfolio especially in rural and international markets.

A tough Endeavour
Ford India has re-launched Endeavour in the premium SUV segment. The company is planning to reap the fast movers’ advantage in the nearly non existent lifestyle SUV segment in India with this new generation Endeavour. To be rolled out in three versions, the company plans to sell 2500 plus units of the ‘aggressively priced’ model. The automobile is an upgraded version of the old Endeavour and is priced in the range of Rs.14,72,000 and Rs.15,52,000. Ford India aims to grow at around 15-16% in the stagnant SUV segment. The company is also planning to launch the diesel variant of its mid-sized vehicle Fusion soon.

Vysya gets Ponting for ‘Zero’
ING Vysya, one of the country’s leading private sector banks recently launched its Freedom savings account, a product targeted at the middle income group. The account is available for all customers and promises freedom from the hassle of minimum balances of normal savings bank accounts. What made the whole deal a special affair was the presence of Australian Captain Ricky Ponting who was brought in to launch the card. Despite the fact that in India about 15% of such zero balance accounts go dormant within the first year of opening, ING Vysya hopes that on average, customers will maintain a balance of anywhere between Rs. 8,000 to Rs.10,000.

The real and reel Sivaji jhooms
South Indian superstar Rajnikant’s recently released Sivaji: The Boss has created waves in the country and also abroad. Sivaji is the country’s most expensive film till date (Rs.600-800 million) and had a record breaking advance booking which accounted for Rs.20 million. In many parts of the country, people paid between Rs.1,000-1,500 to watch it. The mania is not restricted to the country alone. It featured at number 9 in UK Top 10 list (quite an achievement for a regional Indian film). The movie attracted a full week show in Chicago too.