One of the largest ever Indian acquisitions of a US company just took place, and it didn’t come from a huge conglomerate like Tata Group or Reliance Group. Instead, it’s Apollo Tyres, which bought the US’s Cooper Tire & Rubber Co. for $2.5 billion. The transaction shows how even smaller, stand-alone companies from the emerging markets are making bold moves for US acquisitions.
One reason could be that the big American prizes are in sectors that could pose national-security concerns in the US, like telecoms or energy. Foreign buyers have had to aim for smaller deals in those industries. India’s Reliance has done minority investments in shale gas assets in the US, while China’s CNOOC dipped its toe back into the US market in 2010 with a $1.1 billion shale deal after its failed 2005 bid for Unocal.
In sectors that are less politically sensitive, like car tires, it’s another story. So far, there have been $19.3 billion in deals from emerging-market buyers acquiring US companies, according to Dealogic. That’s the highest year-to-date volume in five years. The total volume of deals from emerging markets into the US last year was almost $26 billion, so that looks like it will be easily surpassed in 2013.
The Cooper deal will help Apollo’s growth prospects. The Indian company was facing slowing sales in its native land and in Europe; in the US, though, demand for tires is strong. The Apollo-Cooper deal follows the largest Chinese acquisition of a US company, which occurred last month when Shuanghui International acquired US pork producer Smithfield Foods for $4.7 billion.
Bacon and ham aren’t oil and gas, but to a few politicians, there is still something unsettling about China controlling a big player in the American food supply chain. Still, legal experts expect that the deal will be cleared by the US Committee on Foreign Investment in the US, which reviews foreign transactions for national security issues. Unless politicians squeal louder, Shuanghui’s deal shouldn’t get stuck.
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