Mallya, Mittal, Tata: victims of economic patriotism

NEW DELHI: What's common between Vijay Mallya, Ratan Tata and LN Mittal, besides the fact that they are India-born entrepreneurs looking to dominate global business? All are victims of economic patriotism on foreign soil.

 

It came as no surprise when Mallya's United Breweries announced on Monday it was opting out of the race to acquire French champagne-maker Taittinger after resistance from local groups to his bid.

 

Mittal and Tata have been there, done that.
    
While opposition to Mittal's bid to acquire Luxembourg-based rival Arcelor is something that legends are made of, Tata is hearing voices of discord to its $2 billion investment proposal in neighbouring Bangladesh.

 

Energy experts in Bangladesh, while speaking at a seminar on Monday on Investment Proposal of Tata and the National Interest: A Review in Dhaka University, felt Tata would not have dared to put forward such an investment proposal if Dhaka had had a government that was accountable and transparent.

 

In France, local groups had appealed to Champagne Taittinger's US owner Starwood Group to sell the brewery to a French bidder.

 

Opponents to Mallya's bid were more vocal over the Internet, with an Italian blogger saying it was unimaginable that a Taittinger bottle would be labelled in Hindi, if the Indian liquor baron took over the firm.

 

The 'champions of economic patriotism' in Dhaka claimed the deal would force the government to provide a high subsidy to a foreign company from taxpayers' hard-earned money, while making the country's energy security vulnerable to threats.

 

Tatas' investment proposal includes setting up a 2.4 million tonne steel plant, a 1,000 MW power plant and a fertiliser plant.

 

While denying any 'anti-India' sentiments, the lobby opposing the investment said that Tata has made this proposal only as it would not get gas at a cheaper price anywhere else.

 

The industry experts said earlier this month at a roundtable conference of the National Committee for Protecting Oil-Gas-Mineral Resources and Electricity-Port that the
investment deal with the Indian conglomerate would be 'suicidal' for Bangladesh.

 

In the Mallya-Taittinger case, the UB group known for its aggressive acquisition policies had earlier said that the company was aware of the possible roadblocks to be faced in its  bid to acquire the French company.

 

However, Mallya decided to go ahead with the bid as the approval of workers' council was not required for ratifying the deal in the event of UB group winning the bid, sources said.

 

Mallya was also banking on close ties with the French government, which he had established after Kingfisher Airlines placed an order worth more than $6 billion with French aircraft major Airbus, sources added.

 

However, the French government decided against lending support to Mallya as an acquisition could have given nationalists playing the card of 'economic patriotism' a shot in arm, especially after the recent furore over Mittal's bid for Arcelor, an academician studying trends in the global M&A market said.
    
Incidentally, there were two French bidders along with a member of the Taittinger family in the race for Taittinger, besides the UB Group.

 

Last week also saw Mittal, the world's largest steel-maker, being stunned by Arcelor, which decided to merge with Russia-based Severstal. Trouble was also brewing for Mittal in South Africa, where union workers are planning a revolt against his layoff policies.

 

The National Union of Metal Workers of South Africa has decided to launch a series of protests against Mittal Steel while seeking government intervention in the ongoing restructuring of Mittal Steel South Africa and the company's lay-off policies.

 

While commenting on the continuing opposition to his take over bid of Arcelor, Mittal Steel CEO L N Mittal had aptly summed up: "If a company like ours faces resistance for merger, it could affect businessmen in India who are aspiring to expand globally."

 

Though India has expressed concerns about racism in the business space and European governments have denied it, experts point out that 'economic patriotism' does play a role when it comes to clinching business deals in foreign soil as evident from Arcelor CEO Guy Dolle's statement that Arcelor was Europe's "crown jewel" and its success was vital to Europe's overall economic health.