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January 2021 150/-
Scheme of Arrangement
of JHS Svendgaard
Laboratories:
An attempt to do
miracle in value creation
but for whom?
ACQUISITION
MERGEREmbassy group listing its real estate
business without going through IPO process
Amazon-Future-Reliance Deal -
A Case Study
MERGERRBI merges Lakshmi Vilas Bank
with DBS Bank India
A One of a Kind Online Portal for all your restructuring needs.
The site will soon launch the models apart from various other online models available
as of now to enable professionals and businessman to make a better decision of choosing
and executing a restructuring for their clients and companies.
AIN M FEATURES:
The module enables you to monitor the steps for execution of your deal Online
RESTRUCTURING WIZARD
By
Step Execution Support
Restructuring Modules A Step
Buy & Sell Revamp Expand
Features of Modules:
- Enables you to arrive at an optimal business decision
- Provides you with available modes to execute a transaction
- Relevant Online Support Services. eg. Quick Valuation, Scheme Drafting etc.
For your off line support please turn to the
last page for our parent company which
takes a company restructuring from idea
to integrations. Contact Details too on the
last page.
Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Know your Company's Worth (Valuation Models)
Stamp duty calculator
Legal & Compliance Support
Buy-Sell Center (An online marketplace for buyers and sellers)
Assets Turnaround Services
Enhance Business Performance
m i .ergers ndia com
JHS Svendgaard Laboratories and their group companies do not only manfacture and sell
their own brand of Toothbrushes, Toothpastes, Mouthwash, Denture Tablets, and other allied
oral care product but also do contract manufacturing and selling of products for other
domestic and international brands. Our cover article is on the transaction approved by the
group to segregate their manufacturing & selling business of own and other brand and their
retail investment division by way of demerger and merger. We try to explore what seems to
be a straightforward transaction to simplify the group structure business-wise the
implications and the rationale behind the scheme aren't quite clear.
We covered the in our cover article. In Reliance Retail and Future group deal November 2020
this guest article we look at the legal hurdles the deal faces and the Amazon's intervention
before the deal can go through further. Article looks at various legal implications and only
time will tell about the resolution of the same.
The year 2020 was started with the risk of COVID-19
initially in China and later turned into global
pandemic. Every country was hopeful that the effect
of this pandemic will get reduced at the earliest, but
the same was carried out throughout the year 2020.
The Government came up with the various policies to
help the affected people especially MSME sector.
Insolvency and Bankruptcy Code, 2016 was also
amended to save the corporates from going into
liquidation. Everyone is hopeful with the start of year
2021 since the COVID-19 vaccine is only few meters
away. The vaccine will definitely help not only to the
health of the citizens of the country, but it will also
help the economy of the country which is struggling
for its growth. Now the focus is on the Budget for the
year 2021. It is to be seen whether there are any
better announcements from the government w.r.t
reduction in taxes and other provisions made by the
government to help the various affected sectors. In
India, deal values in 2020 nearly retained momentum with the previous year, recording 1,268
transactions worth $80 billion, up 7% from 2019, said a PwC India report. If we consider the
M&A volume globally, it has been down 18 per cent by value ($2817 Billion) and 14 per cent by
volume (44,926) from the previous 12 months. Corporates should definitely think of inorganic
growth modes like corporate restructuring which can act as a shock-absorbers against the
effect of global pandemic.
Our next article is on what seems to be an inevitable step for Lakshmi Vilas Bank (LVB). RBI
has allowed the merger of LVB with DBS bank, a foreign bank, with presence in India since
1994. As most of the foreign banks have only wholesale banking operations, this merger
helps DBS bank to expand its retail banking in India and its geographical reach as well. With its
failed attempt merge with Indiabulls housing Finance to in 2019, this will help LVB given that
post-merger integration of banks with completely different cultures works out in the long
term.
Indiabulls group and Embassy group has been closely associated with each other for a long
time. The recent transaction of merging subsidiaries of Embassy group with IndiaBulls Real
Estate Ltd. (IBREL) will create one of the biggest real estate development platforms in the
listed company's space. The transaction seems to be a win-win for both groups as well as
their shareholders and has less legal requirements under SEBI takeover code as well for it get
approved.
Editor: Dr. Haresh Shah
Editorial Board
Mr. Upendra Shah
Mr. Vikram Trivedi
Mr. Nitin Gutka
Mr. Neeraj Marathe
Advisors
Mr. Aniruddha Jain
Mr. Padam Singh
Mr. Sanket Joshi
Research Team
First Floor, Matruchaya building,
Plot no 27, Mitramandal Colony, Pune 411 009.
Telefax : (020) 2442 5826
Email : [email protected]
Editorial & Marketing Office
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MKA Chambers, Crossley House,
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Off Bombay Samachar Marg,
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Email : [email protected]
Legal Associate
Mrs. Jyoti Shah on behalf of
HU Mergersindia.com Pvt. Ltd.,
First Floor, Flat no 1, Matruchaya building,
Plot no 27, Mitramandal Colony,
Parvati, Pune - 411 009.
Telefax : 020 24420209
Printed & Published by
or any of it's
sister concerns are not legally or otherwise
liable for any consequences arising out of the view
expressed. HU Mergersindia.com Pvt. Ltd. assumes
no liability or responsibility for any inaccurate,
delayed or incomplete information, nor for any
actions taken in reliance thereon. The information
contained about each individual, event or
organization has been provided by such individual,
event organizers or organization without verification by
us.
Disclaimer
HU Mergersindia.com Pvt. Ltd.
Dr. Haresh Shah
Along with our regular features
Happy Reading….
ED
ITO
RIA
L
www.mergersindia.com www.mnacritique.com 03
Reliance Retail and Future group deal November 2020
failed attempt merge with Indiabulls housing Finance
INSI
DE
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
ACQUISITION
COVER ARTICLE Scheme of Arrangement of HS Svendgaard
Laboratories: An attempt to do
miracle in value creation but for whom?
MERGEREmbassy group listing its real estate
business without going through IPO process
20
Amazon-Future-Reliance Deal -
A Case Study
15
18
12
05
MERGERRBI merges Lakshmi Vilas Bank
with DBS Bank India
M&A DIGEST
04 Vol. XXIX Issue No. 10 January 2021
ACQ
UIS
ITIO
N
Amazon-Future-Reliance Deal -
A Case Study
Executive Summary:
The recent discussions on the Amazon-
Reliance-Future acquisition throws the
l ight on the rights, l imits and the
modalities of exercising Shareholder
rights. This has also thrown open specific
issues on the supremacy of:
• The dispute resolution mechanism
• The provisions of the Companies Act
201 3 which govern the Company
Administration with regard to decisions
taken by the shareholders either through
the Board or at the General meetings or
as contemplated under Section 442 of
the Companies Act, 2013 or
• the Provisions of the Arbitration &
Conciliation Act, 1996 as amended or
• the Share Purchase agreement
entered between the Promoters and an
investor shall overtake the provisions of
the Companies Act 2013 regarding
• C h a p t e r X V , C o m p r o m i s e
Arrangements & Settlements that calls
for approval by Shareholders at specially
convened General Meetings
• Can a minority shareholder hold the
majority decisions difficult to implement
through a parallel Share Purchase
Agreement with the Promoter?
Introduction:
The write up intends to analyse the
relative merits of having options available
to companies in ensuring investor
protection through restrictions on share
transfer, entry of new shareholders,
alternative methods of raising capital,
enforcement of Commercial Contracts
and dispute resolution mechanism. This
also makes an attempt to understand the
conflicts if any exist among the above
CA Chandrasekaran Ramadurai
www.mergersindia.com www.mnacritique.com 05
06 Vol. XXIX Issue No. 10 January 2021
Though HUL was the first to come outwith similar scheme as early as in 2001,Britannia is issuing bonus debenturesthird time.
options and if so which of the options shall
have supremacy or overriding effect on
the other.
Brief facts of the subject
under discussion
1. Amazon has entered into a Share
Subscription agreement with Future
Coupons Limited and a Share Purchase
Agreement with the promoters of Future
Retail in October 2019.
Important ingredients of an SPA are:
a. Parties – Amazon & the promoter
group of Future Retail
b. Indemnity against non-disclosure of
material information – the intention to
comply with the terms of SPA must have
been disclosed mutually
c. Resolution of dispute and arbitration
– If parties are based in India, the seat of
arbitration will be India and if one of them
is an outsider then the place of choice by
that party outside India- Since Amazon is
a Company incorporated in the US, the
seat of Arbitration has been chosen as
Singapore
3. As part of the agreement, Amazon
has been granted a call option. This call
option allows Amazon to acquire all or
d. Execution and Effective date – the
date of execution here is October 2019
while the effective date has to be aer
fulfilment of certain conditions. Since we
are not privy to the terms of SPA, the
conditions precedent could not be
ascertained and only know that there is
an offer period of a minimum of 3 to a
maximum of 10 years meaning that the
Amazon’s re spons ib i l i ty sha l l be
completed before the end of 3rd year
from the date of signing at the earliest
and could be completed before the expiry
of 10 years from that date – Not earlier
than the end of Oct 2022 and not later
than the end of October 2029.
2. As part of the investment, Amazon is
also getting rights to acquire Biyani’s
promoter group stake in Future Retail at a
future date.
5. Future Coupons Limited is the
holding company of Future Group of
companies
part of the Promoters' shareholding in
Future Retail Ltd, and is exercisable
between the 3rd to 10th years, in certain
circumstances, subject to applicable law
4. To quote news reports on the
subject-
b. As part of the investment, Amazon is
also getting rights to acquire Biyani’s
promoter group stake in Future Retail at a
future date.
c. “As part of the agreement, Amazon
has been granted a call option. This call
option allows Amazon to acquire all or
part of the Promoters' shareholding in
Future Retail Ltd, and is exercisable
between the 3rd to 10th years, in certain
circumstances, subject to applicable law,"
e. The transact ion is subject to
regulatory approvals, the company said.
7. As a part of the deal, Future Retail will
sell its supermarket chain Big Bazaar,
premium food supply unit Foodhall and
fashion and clothes supermart Brand
Factory’s retail as well as wholesale units
to Reliance Retail
6. By this Share Purchase agreement,
Amazon has restricted the investment
opt ion in Future Reta i l by many
prospective investors including Reliance,
Walmart, Alibaba and a host of around 15
Global and local players from buying into
Future’s retail assets
d. The promoters have also agreed to
certain share transfer restrictions on their
shares in the Future Retail for the same
tenure, including restrictions to not
transfer shares to specified persons, a
right of first offer in favour of Amazon, it
added.
a. Financial details of the transaction
were not disclosed.
8. The deal is valued at INR 24,713 crore,
subject to adjustments as set-out in the
composite scheme of arrangement. This
acquisition is subject to SEBI, CCI, NCLT,
c. Future Retails has more than 1,500
stores pan India.
d. The deal had also given Amazon a
‘call’ option, which enabled it to exercise
the option of acquiring all or part of Future
Coupon’s promoter, Future Retail ’s
shareholding in the company, within 3-10
years of the agreement.
10. The points submitted by Amazon
are:
9. While the Future Reliance deal was
going through procedural aspects,
Amazon filed a restraint application
through Emergency Arbitration at
Singapore based on following points-
Last year, Biyani’s Future Retail had
signed another deal with global e-
commerce giant Amazon.
a. As part of the deal, Amazon had
acquired 49 per cent stake in Future
Coupons, the promoter firm of Future
Retail in a deal worth nearly Rs 2,000
crore.
b. While Future Retail would be able to
place its products on Amazon’s online
market place, the two had also agreed
that the Future Retails products would
also be a part of Amazon’s new plan, which
intended to deliver products in select
cities within two hours of a customer
ordering them.
shareholders, creditors and other
requisite approvals
e. Aer Future’s agreement with
Reliance, Amazon said the deal between
Reliance Future Group was a violation of a
non-compete clause and a right-of-first-
refusal pact it had signed with the Future
Group. The deal also required Future
Group to inform Amazon before entering
into any sale agreement with third
parties.
On its part, the Future Group has said that
it had not sold any stake in the company,
and was merely selling its assets and had
therefore not violated any terms of the
contract.
11. On October 25, emergency arbitrator
a. Indian Contract Act,1872 –
ii. Section 42 – Private placement
4) Will Arbitration and Conciliation Act
,1996 as amended have overriding powers
above the contractual rights of the
parties under the
3) By signing a Share Subscription
agreement which allows Amazon to
invest in the shares of Future Coupons
Limited and through a Share Purchase
agreement a call option to buy out the
promoters’ shares in Future Retail in the
future ranging from 3 to 10 years stop
Future Coupons or its promoters from
exercising their present rights as
Shareholders in Future Retail to transfer
their shares and vote on resolutions
concerning Amalgamation and Mergers
under Chapter XV- Sections 230 to 240 of
the Companies Act 2013?
i. Section 62 (1) (a) & (b) – Pre-emptive
rights
b. the provisions of Companies Act
under
iii. Section 62(1) (c) – Preferential
allotment
V K R a j a h i s s u e d a n e m e rg e n c y
arbitration order (EA order) in favour of
Amazon. The order restrains Future
Group entities from proceeding with the
share seal deal or any such agreement
with Reliance and other restricted parties
mentioned in the non-compete clause
signed between Amazon and Future
Coupons.
Now the following
questions arise:
1) Will the Share Purchase Agreement
provide the voting rights under the
Companies Act 2013 even before the
parties have fulfilled the investment
obligations?
2) Does the Articles of Association of a
Company allow a contracting party even
before he has invested in the company’s
shares the right of pre-emption under
Section 62 of the Companies Act 2013?
www.mergersindia.com www.mnacritique.com 07
In India, the re-structuring perceived to
be an option available for bigger
companies only. However, finally one
must understand that this can be used
by a proprietor to a company like
Reliance. The way to do it will change as
per the size and requirements,
however, can create a similar value to
all the entities. Identifying the need
for restructuring and various ways
becomes the most crucial thing in any
restructuring.
F o r m a n a g e m e n t o r t h e i r
professionals should revisit the growth
strategies and requirements for
restructuring at least once in every five
years.
We shall look at the reasons for internal
restructuring in a different article. This
article also does not look at joint
ventures or strategic partnerships
which are also better structuring
options in certain circumstances.
1) The Indian Contract Act 1872
Regulations 2011
5) W i l l t h e fi l i n g o f t h e S h a r e
Subscr ipt ion Agreement between
Amazon & Future Coupons and the Share
Purchase Agreement with the promoters
of Future Retail with the Stock exchanges
give rise to conclusive rights to the
“acquirer” or is it only a disclosure
requirement under SEBI (Substantial
Acquisition of Shares and Takeover)
Regulations, 2011?
3) The Provis ions of SEBI(SAST)
Regulations,2011
SEBI (SAST)
4) The Arbitration & Conciliation Act
1996 as amended.
We will briefly consider the above
que st ions w i th re ference to the
provisions under
6) Does the action by Future Retail to
enter a scheme of reconstruction under
the provisions of Chapter XV (Sections
230 to 240) of the Companies Act, 2013
transferring the assets, brand and
liabilities with a non-compete clause not
to indulge in retail business for a period of
15 years, to subsidiaries of Reliance
Industries, a breach of contract between
the promoters of Future Retail and
Amazon entered in October 2019?
Under SEBI (SAST) Regulations, 2011, the
following points are pertinent:
2) Under Section 2(1)(b)–acquisitionǁ
means, directly or indirectly, acquiring or
agreeing to acquire shares or voting
rights in, or control over, a target
company; s ince there is a Share
Subscr ipt ion agreement between
Amazon & Future Coupons
2) The Companies Act 2013
1) Under Section 2(1)(a), Amazon is an
acquirer - ,” – acquirerǁ means any person
who, directly or indirectly, acquires or
agrees to acquire whether by himself, or
through, or with persons acting in concert
with him, shares or voting rights in, or
control over a target company”
4) Under Section 2(1)(s) – “promoter”
has the same meaning as in the Securities
and Exchange Board of India (Issue of
Capital and Disclosure Requirements)
Regulations, 2009 and includes a member
of the promoter group
3) Under Section 2(1)(p) – “–offer period
means the period between the date of
entering into an agreement, formal or
informal, to acquire shares, voting rights
in, or control over a target company
requiring a public announcement, or the
date of the public announcement, as the
case may be, and the date on which the
p a y m e n t o f c o n s i d e r a t i o n t o
shareholders who have accepted the
open offer is made, or the date on which
open offer is withdrawn, as the case may
be; - Here the date of signing of Share
Subscription Agreement is available –
October 2019 but the date of receipt of
payment of Consideration from Amazon
is Not available as it has not exercised its
Call option to subscribe to the shares in
Future Coupons or its subsidiaries
i. who has been named as such in a
dra offer document or offer document
or is identified by the issuer in the annual
return referred to in section 92 of the
Companies Act, 2013; or
a. Under Section 2(1)(oo) of SEBI (ICDR)
Regulations,2009 (oo) “promoter” shall
include a person:
ii. who has control over the affairs of
the issuer, directly or indirectly whether
as a shareholder, director or otherwise; or
iii. in accordance with whose advice,
directions or instructions the board of
directors of the issuer is accustomed to
act:
b. In this context we can safely conclude
that Mr Biyani of the Future group
represents the promoter under SEBI
(ICDR) & SEBI (SAST) Regulations.
5) Issuer under section 2(1)(aa) of SEBI
(ICDR) Regulations - (aa) “issuer” means a
company or a body corporate authorized
to issue specified securities under the
relevant laws and whose specified
securities are being issued and/or offered
for sale in accordance with these
regulations – Here the company with
08 Vol. XXIX Issue No. 10 January 2021
which the Share Subscription Agreement
has been signed is the company that will
issue the securities – Here Future
Coupons Pvt Ltd is a private limited
company whose ability to issue shares is
restricted under the provisions of the
Companies Act 2013- Section 2(68) of the
Companies Act 2013. Hence Future
Coupons is not an ISSUER
6) Under Section 2(1) (z) –”target
company” means a company and
includes a body corporate or corporation
established under a Central legislation,
State legislation or Provincial legislation
for the time being in force, whose shares
are listed on a stock exchange – Here
Future Coupons Pvt Limited is a private
limited company whose shares are Not
listed on any stock exchange. Hence
Future Coupons Private Limited could
not be the Target Company
a. Though the SSA is between Future
Coupons Pvt Limited a private company
to which SEBI Regulations do not apply,
there is a call option given to Amazon to
buy into the promoters’ shares in Future
Retail Limited ( a right of first refusal) to
be exercised over an offer period of 3 to 10
years.
b. T h u s A m a z o n b e c o m e s t h e
“acquirer” in Future Retail Limited,
c. Amazon has an option to buy the
7) The Share Purchase Agreement is
not between Amazon and the promoters
of Future Retail Limited- CHAPTER - V
DISCLOSURES OF SHAREHOLDING AND
CONTROL of SEBI (SAST) Regulations,
govern the disclosures to be made with
respect to the aggregate of shares held
by the acquirer or the promoter together
with persons act ing in concert . -
Regulation 28(1). We understand that
post signing the Share Subscription
Agreement/ Share Purchase Agreement,
Future group had made the Exchange
filings giving details of the proposed
investment by Amazon ( SSA to buy into
49% in Future Coupons with a First Right
of refusal to acquire the promoter group’s
shares in Future Retail Limited). Thus the
SSA is with Future Coupons but a call
option to buy out the promoters’ shares
in Future Retail Limited. This brings to the
following conclusions:
shares of Future Retail over an offer
period of 3 to 10 years and
d. This makes Future Retail the Target
Company
5) The Future Retail have chosen to
enter into a composite scheme of
amalgamation with Reliance Retail , a
subsidiary of Reliance Industries Ltd
whereby the assets and liabilities of
Future Retail shall be transferred to
R e l i a n c e R e t a i l f o r a n a g r e e d
cons iderat ion of US$3.4 b i l l ion (
approximately INR 24,711 Crores). This is a
composite scheme that is subject to
a p p rova l s f ro m S E B I , CC I , N C LT,
shareholders, creditors and requisite
2) The SPA allows Amazon the first
right of refusal to buy out the promoters’
shares in Future Retai l . – This is
contractual between Amazon and the
promoters of Future Retail and outside of
the provisions of the Companies Act 2013.
1) The SSA allows Amazon to invest into
Future Coupons an investment up to 49%
of the Future Coupons Issued capital. –
this is a materialized contract where
compliance requirements under the
Companies Act 2013 with reference to
62(1) (c) – preferential allotment have to
be fulfilled
e. Hence under Regulation 28(1) Future
Retail has made Exchange filing in
October 2019.
4) The contractual fulfilment of the SPA
by either of the parties (Amazon or Mr
Biyani and other promoter group
members) will be governed by the
provisions of the Indian Contract Act 1872
and can a lso be re so lved under
Arbitration & Conciliation Act 1996 if there
is a dispute resolution mechanism
provided for in the SPA
Under the Companies
Act 2013
3) The disclosure made by Future Retail
on signing of this SSA & SPA is from the
possibility that Amazon might exercise
the option quickly and hence there could
be a change in the promoter status in
Future Retail
8) T h e a b o v e i s a c o n t ra c t u a l
right/obligation which requires study
under the provisions of the Indian
Contract Act 1872.
approvals and which will be governed by
t h e p r o v i s i o n s o f C h a p t e r X V
Compromises, Arrangements and
Amalgamations under the Companies
Act 2013.
6) As shareholders of Future Retail, the
promoter group that has signed the SPA
with Amazon in October 2019 will have to
exercise their voting rights when the
approval of shareholders for the
proposed scheme of arrangement comes
up for voting as required under section
230 (6) of the Companies Act 2013.
a. It is made by the free consent of
parties competent to contract, for a lawful
consideration and with a lawful object,
and is not hereby expressly declared to
be void
b. The consideration of Amazon’s 49%
investment in Future Coupons Pvt Ltd,
could not be for its acquiring Call options
to buy out the promoters’ shares in
Future Coupons at a future date (3 to 10
years). The allotment of 49% shares in
Future Coupons against the Subscription
money received is the consideration
c. The Call option rights can at best be
considered as a promise which though
agreed and accepted by the promoters
under the SPA does not provide the
consideration – it has to be tangible and
not a promise
Under the Indian
Contract Act 1872
1) Whether the Amazon – Future
promoters’ Share Purchase Agreement
over a period of 3 to 10 years is a contract
or a contingent contract?
2) If it is a Contract because
7) With the obligation to sell their
promoter shares to Amazon based on the
SPA, whether they will be permitted to
exercise their voting rights at the EGM
held for the purpose of approval of the
scheme is a question to be answered.
www.mergersindia.com www.mnacritique.com 09
ii. If Amazon chooses to exercise its call
option to buy the shares not before the
end of the 3 year period, or chooses to
wait till the close of the offer period i.e.10
year period ( close to October 2029), then
there is a risk of the valuation of Future
Retail shares getting completely wiped
out considering the financial stress the
company is going through with reference
to settling its materialised liabilities
3) Could it be a Contingent Contract?-
c. Till the expiry of a minimum of 3 years
and a maximum of 10 years for which
Amazon has time to make a decision to
acquire the promoters’ share is a long
shot for the promoters to wait and not do
anything till the expiry of the uncertain
future event.
a. Section 31 of the Indian Contract Act,
1872 - “Contingent contract” defined.—A
“contingent contract is a contract to do or
not to do something, if some event,
collateral to such contract, does or does
not happen.
i. The contract specifies by which the
promoters of Future Retail have to sell
their shares to Amazon when the latter
offers to buy them which will be exercised
not earlier than 3 years from October
2019 and not later than October 2029
b. Under Section 32 of the Indian
Contract Act, 1872 - Enforcement of
contracts contingent on an event
happening.—Contingent contracts to do
or not to do anything if an uncertain
future event happens cannot be enforced
by law unless and until that event has
happened . I f the event becomes
impossible, such contracts become void
4) The Call option as understood from
the SPA gives Amazon a first Right of
refusal to buy out the equity shares of the
promoters
5) This also has a condition that each
time a suitor approaches the promoters,
they are expected to communicate
Amazon of the offer from the suitor and
Amazon shall either exercise the call
option or refuse to exercise in which case
the promoters shall be permitted to sell
their holdings to the other suitor.
8) It does not specifically say that but
only show a restricting clause that
prevents the promoters from selling to
any one from the list
9) Is it not an agreement in restraint of
Trade?-
7) Do we understand that if proposed
suitor who offers to buy out the
promoters’ shares is one of those in the
list of 15, then Amazon will compulsorily
acquire the promoters’ shares?
a. According to Section 27 of the
Contract Act, Agreement in restraint of
trade, void.—every agreement by which
any one is restrained from exercising a
lawful profession, trade or business of
any kind, is to that extent void.
b. Restraining the promoters from
selling their shares to any suitor who is
named in the prohibited list in the SPA is
clearly an agreement in restraint of the
lawful right of the promoters to sell their
shares to anyone of their choice based on
commercial consideration. This restraint
also does not come within the Exception
1provide in the section.—Saving of
agreement not to carry on business of
which good-will is sold
Recourse when one of
the parties refuse to
perform the Contract
Now with the composite scheme being
signed and the process put in motion for
the nece ssary approva ls by the
Shareho lders , SEB I , Compet i t ion
Commission and NCLT, Amazon’s option is
to ensure specific performance under the
Contract (SPA).
6) The SPA also provides that the
promoters shall not sell their stakes to a
host of 15 investors that includes
Reliance, Walmart, Alibaba and other
names included in the SPA.
Chapter V of the Contract Act 1872 deals
with the performance of the contract.
Since the discussion veers around
whether the SPA between Amazon and
the promoters of Future Retail is a
4) Now the EA order is being contested
in the Delhi High Court on merits whether
they are executable in India. –
3) Once the Composite scheme of
arrangement between Future Retail and
Reliance Retail was signed and the
process to obtain the necessary
approvals( regulatory and under the
Companies Act) is set in motion, Amazon
invoked the arbitration clause in the SPA
and On October 25, emergency arbitrator
V K R a j a h i s s u e d a n e m e rg e n c y
arbitration order (EA order) in favour of
Amazon. The order restrains Future
Group entities from proceeding with the
share seal deal or any such agreement
with Reliance and other restricted parties
mentioned in the non-compete clause
signed between Amazon and Future
Coupons
1) The Share Purchase Agreement
(SPA) provides for arbitration to settle the
disputes between Amazon and the
promoters of Future Retail
2) The seat of arbitration is fixed at
Singapore
Now comes the dispute
resolution
contract under Section 10 or a Contingent
Contract under Section 31, it is not
possible to decide on who will start the
performance whether Amazon or Future
Retails promoters. Though the SPA is
signed in October 2019, there is no visible
offer to exercise their call option by the
Amazon and with the mounting debt in
Future retail, it is only commercially
prudent to allow a cash rich suitor
(Reliance Retail) to acquire the Target
Company (Future Retail) which will save
the company from going into liquidation
and also give the promoters the much
needed Return on their Investment.
Whether the SPA comes under the
provisions of Section 29 of the Contract
Act is a matter for judicial interpretation-
29. Agreements void for uncertainty.
—Agreements, the meaning of which is
not certain, or capable of being made
certain, are void.
The Delhi High Court declined Future
Retail Ltd.’s plea that Amazon.com Inc.
The deal will augment HCL's capacity toservice the growing demand for digitalstrategies in the Australian and NewZealand markets
ACQ
UIS
ITIO
N
10 Vol. XXIX Issue No. 10 January 2021
next-gen technologies as a focus area for
growth. In fact, the company has been
quite aggressive in acquiring companies
and has struck a dozen deals in India and
overseas since 2015. In May, HCL
Technologies acquired products and
services built on Cisco Systems Inc.'s
network technology for $50 million in
cash.
Done deal
Hybrid cloud, digital workplace, networks,
cyber-security are some of the strong
service offerings from the company as
these have become critical for any
transformational plans. The company has
underlined that it will look at acquisitions
in the digital and product space to build
innovative products and expand in some
geographies.
For HCL, the rationale for the acquisition is
that DWS generates around 29% of
revenues from banking & financials, 43%
from government & defence, 6% from
utilities and 7% from IT services and
others 15%. As DWS has over 700
employees and offices in Melbourne,
Sydney, Adelaide, Brisbane and Canberra
and delivers business and technology
innovation to large clients across a
spectrum of verticals, it will help HCL to
leapfrog and scale in terms of growth and
presence in the region.
The acquisition will not only boost HCL's
revenue and geographic presence, it will
also lead to margin expansion because of
higher offshoring. It is estimated that the
acquisition will help to add around 1% to
HCL's top line in FY22 as it will aid in
expanding presence in Australia and New
Zealand. The company will also be able to
cross sell and up sell to existing clients of
DWS. As revenues of DWS fell in two of the
last five fiscal years and operating
profitability soened, HCL's execution
ca p a b i l i t i e s ca n h e l p i t i m p rove
profitability and extract better value. The
acquisition will be done by HCL Australia
Services Pty. Limited, a wholly owned
s t e p - d o w n s u b s i d i a r y o f H C L
Technologies Ltd.
With the Covid-19 pandemic, there is
urgency amongst clients for technology
adoption, and modernization of digital
services. Financial services continue to be
b) Future Retail may not suffer an
irreparable loss to FRL because even if
Amazon has made representations
based on incorrect facts, it will be for the
statutory authorities/regulators to apply
their mind and come to the right
conclusion.
5) India is a signatory to New York
Convention - United Nations Conference
on International Commercial Arbitration,
New York, 20 May–10 June 1958
6) PART II ENFORCEMENT OF CERTAIN
FOREIGN AWARDS CHAPTER I- New York
Convention Awards provide under section
44, the circumstances and conditions
subject to which Foreign Arbitral awards
can be executed in India.
a) in pursuance of an agreement in
writing for arbitration to which the
Convention set forth in the First Schedule
applies, and
The request for the relief was rejected by
the High Court for the following reasons –
a) In case Amazon is not permitted to
represent its case before the statutory
authorities/regulators, it will suffer an
irreparable loss. This because Amazon
claims to have created preemptive rights
in its favour in contemplation of any
change in Indian law that would permit it
to hold substantial shareholding of FRL.
b) In one of such territories as the
Central Government, being satisfied that
reciprocal provisions have been made
may, by notification in the Official Gazette,
must be stopped from writ ing to
statutory authorities. The statutory
authorities and regulators are directed to
decide in accordance with the law, the high
court said.
7) Section 44. Definition.—In this
Chapter, unless the context otherwise
requires, “foreign award” means an
arbitral award on differences between
persons arising out of legal relationships,
whether contractual or not, considered as
commercial under the law in force in India,
made on or aer the 11th day of October,
1960—
a) The Emergency award is to be from a
territory that has signed the convention.
Singapore which is a signatory to the New
York convention is one that has issued
the Emergency Award.
a) Volume 19. Kluwer Law International,
2017, p. 814: “[…] institutional rules
typically provide that the relief granted by
the emergency arbitrator lapses once the
arbitral tribunal is constituted. Therefore,
any such relief cannot be construed to
be final and would not be enforceable
under the New York Convention.”
declare to be territories to which the said
Convention applies.
8) Thus under Section 44 of the
Arbitration & Conciliation Act 1996 , for a
foreign award to be executed in India the
following have to be complied with
b) The definition of foreign award in
order that it becomes executable in India
expects that the dispute between
Amazon and promoters of Future Retail is
due to a legal relationship and that
dispute is considered as commercial
under currently existing law in India in
force. This is a matter for Courts to decide
9) Whether an Emergency Award is a
Foreign award under the New York
Convention and so covered under Section
44 of the Arbitration Act 1996 -
In India, the re-structuring perceived to
be an option available for bigger
companies only. However, finally one
must understand that this can be used
by a proprietor to a company like
Reliance. The way to do it will change as
per the size and requirements,
however, can create a similar value to
all the entities. Identifying the need
for restructuring and various ways
becomes the most crucial thing in any
restructuring.
F o r m a n a g e m e n t o r t h e i r
professionals should revisit the growth
strategies and requirements for
restructuring at least once in every five
years.
We shall look at the reasons for internal
restructuring in a different article. This
article also does not look at joint
ventures or strategic partnerships
which are also better structuring
options in certain circumstances.
b) The promoters are contesting
Amazon’s argument by stating that
there is no violation of the conditions
of the Share Purchase Agreement but
only the relative assets and liabilities
of the Future Retail are being sold to
reliance Industries. If so, why should
the transaction go through the
Chapter V covering Compromise and
Arrangements and not through the
provisions of Section 180(1) (a) of the
Companies Act 2013 which allows with
Shareholder approval, the Board of
Directors the power to sell, lease or
otherwise dispose of the whole or
substantial ly the whole of the
a) Matter is sub-judice before the
Delhi High Court
c) Amazon’s SPA giving them time to
a long period of 10 years to decide on
their Call option to buy or not the
promoter shares may be viewed as a
ploy to get a very diluted valuation for
the shares since it is an attempt to
bind the promoters to the SPA
without a corresponding financial
commitment on Amazon to buy the
promoter shares . There is no
valuation indicated in the SPA
d) The contractual terms are open to
legal and judicial interpretation due to
2. The consideration is not defined
o r p a i d u n d e r t h e A m a z o n –
Promoters of Future Retail SPA
4. Whether the Emergency Award is
a Foreign Arbitral award covered
under Section 44 of the Arbitration &
Conciliation Act 1996?
5. If Amazon is keen on entering the
e-commerce space in India directly,
then why did it not offer a deal value
and get into the similar composite
s c h e m e o f a m a l g a m a t i o n o r
arrangement in October 2019 instead
of just signing an SPA with the
promoter group? Is this knowing well
that Future Retail is into huge debts
and there is liquidity crunch and if
Amazon could buy some more time,
they could get a low valuation and buy
out an existing brand with a huge
distribution network for a song?
6. This doubt comes when FDI in e
commerce since 2018 is through the
automatic route up to 100%
1. The SPA could be a contingent
contract
undertaking of the company or where
the company owns more than one
undertak ing , o f the who le or
substantially the whole of any of such
undertakings?
3. Whether the dispute is due to
legal relationship is a matter for
judicial interpretation
www.mergersindia.com www.mnacritique.com 11
T h i s a r t i c l e i s w r i t t e n b y C A
Chandrasekaran Ramadurai, Proprietor
at C Ramadurai & CO | Chartered
Accountants. https://www.linkedin.com/in/ramadur
aicha ndrasekaran/
He is a chartered accountant ,
Inso lvency Profe ss io n a l a n d a
Registered Valuer. You can reach him at
Sources and References are given at the
End Notes
INTERNATIONAL NEWSCROSS BORDER NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
Founded in 1984 by Ranjit Bhavnani, Calibre is a specialty
ingredients maker dealing in iodine derivatives,
persulfates and perchlorates. The company's customers
span the US, Europe and Asia, which contribute
approximately two-thirds to its revenue.
“Calibre is a high quality and a globally established player
with significant untapped potential. Combining the
founding family's entrepreneurial skills and strong
governance with Everstone's operational expertise and
experience, we expect Calibre to excel, innovate and
Private equity firm Everstone Capital has signed an
agreement to acquire a controlling stake in Calibre, a
specialty ingredients manufacturer of pharmaceutical,
nutritional and personal care products, the investor said
in a statement on Sunday. Financial details of the
transaction were, however, not disclosed.
scale," said Sameer Sain, co-founder and chief executive,
Everstone Group.
T h e M u m b a i - h e a d q u a r t e r e d c o m p a n y h a s
manufacturing facilities at Sarigam, Gujarat, with globally
recognized certifications and registrations, such as from
the US Food and Drug Administration (FDA), EU's
Registration, Evaluation, Authorisation and Restriction of
Chemicals (REACH), Food Safety and Standards
Authority of India (FSSAI) and UK's International
Organization for Standardization (ISO).
Everstone's portfolio companies include nutraceutical
ingredients firm OmniActive, complex generic and
specialty pharma products manufacturer Slayback
Pharma, and pharma distribution platform Ascent Health
among others. Last year, it had announced its successful
exit from Rubicon Research generating returns of 4.5
times.
Everstone Capitalto acquirecontrolling stakein Calibre
06 Vol. XXIX Issue No. 10 January 2021
https://dipp.gov.in/sites/default/files/pn2_2018.pdf
https://blog.ipleaders.in/analysis-of-shareholders-agreement-share-purchase-agreement-and-share-subscription-
agreement/#:~:text=Share%20Subscription%20agreement%20is%20draed,new%20shares%20of%20the%20company.&text
=A%20share%20subscription%20agreement%20acts,investor%20at%20a%20certain%20price
https://www.barandbench.com/dealstreet/sam-khaitan-cam-trilegal-wadia-ghandy-act-on-reliance-acquisition-of-future-group
https://reorg.com/asia-future-group/#:~:text=The%20composite%20scheme%20of%20arrangement,with%20subsidiaries
%20of%20Reliance%20Industries.
https://economictimes.indiatimes.com/industry/services/retail/amazon-future-coupons-deal-named-15-cos-as-
untouchables/articleshow/79052969.cms?from=mdr
https://www.barandbench.com/dealstreet/sam-khaitan-cam-trilegal-wadia-ghandy-act-on-reliance-acquisition-of-future-group
12 Vol. XXIX Issue No. 10 January 2021
ME
RG
ER
Embassy group listing its real estate
business without going through IPO process
The proposed merger of Indiabulls Real
E s t a t e L t d . 's ( I B R E L) w i t h t w o
subs id iar ies of Benga luru-based
Embassy Group will create one of India’s
leading listed real estate development
platforms with launched/planned area
totalling to 80.8 Mn Sq. Ft, having 53%
commercial and 47% residential assets,
and 30 projects with key geographical
focus in Mumbai (MMR), NCR, and
Bengaluru. The Amalgamated Company
will have a strong market leadership
potential, post Amalgamation, with:
• Net surplus from Residential projects
(including launched and planned projects)
of ₹18,592 Cr.
• Potential Annual rent on completion
of planned commercial projects of ₹4,241
Cr.
• Land Bank (with future development
Group's vision of consolidation of the real
estate business with an earlier merger
transaction announced by the group last
year and covered in our September issue.
potential) of 3,353 acres.
This transaction seems to be in line with
Indiabulls Real Estate Limited (IBREL) is
a listed company and is engaged in the
b u s i n e s s o f c o n s t r u c t i o n a n d
d e v e l o p m e n t o f re s i d e n t i a l a n d
commercial properties across India.
NAM Estate Private Limited (NEPL) is
engaged in the business of construction
and development of real estate projects
and provided allied services. It WoS of
EPDPL internal restructuring and aer
internal restructuring promotors and
groups companies holds 78.4% and
Institutional Investor holds 21.6%.
Embassy One Commercial Property
Development Private Limited (EOCDPL)
is engaged in the business of providing
common area maintenance services to
construction and development of real
Padam Singh
Internal Restructuring of groupcompanies of Embassy group is requiredbefore the main transaction of mergerwith IBREL.
https://mnacritique.mergersindia.com/indiabulls-real-estate-merger-embassy-group/
group’s vision of consolidation of the real
estate business with an earlier merger
transaction
https://economictimes.indiatimes.com/industry/services/retail/amazon-future-coupons-deal-named-15-cos-as-
untouchables/articleshow/79052969.cms?from=mdr
September issue.
https://mnacritique.mergersindia.com/product/september-2020/
www.mergersindia.com www.mnacritique.com 13
Pre-merger internal
restructuring by
Embassy Group
IV. Share swap w i th th i rd par ty
investors of securities held in identified
SPV’s for equity shares of NEPL.
II. Transfer securities of EODPL held by
EIPL to NEPL by way of Share Purchase
Agreement (SPA).
I. Demerger of identified undertakings
including its 13.89% holding in IBREL of
EPDPL to NEPL. As a consideration, NEPL
issues 41 fully paid-up equity shares of Rs.
10 each for every 100 equity shares of Rs.
10 each.
Pre-merger restructuring
between private
companies of both
groups
V. Transfer of rights in residential units
held by OMR to EIDPL by way of
assignment agreement for sale followed
by swap of consideration received for
convertible securities of NEPL.
Other companies of Embassy Group
involved as part of restructuring of
Embassy group Embassy Property
Developers Private Limited (EPDPL),
Embassy One Developers Private
Limited (EODPL), Embassy Inn Private
Limited (EIPL), Udhyaman Investment
Private Limited (UIPL), OMR Investment
LLP (OMR), Embassy Infra Developers
Private Limited (EIDPL) Before merger
with Indiabulls embassy group went
through massive internal restructuring to
enhance value of NEPL before merger
with IBREL as follow
Indiabulls Properties Private Limited
(IPPL) comprises of the residential project
III. Slump sale of specified residential
undertaking of UIPL to NEPL.
estate projects and other related
services. It is WoS of EPDPL pre-swap
exercise aer swap exercise the entire
shares holds by the shareholders of IPPL.
14 Vol. XXIX Issue No. 10 January 2021
The amalgamated company will cater not
only to Bengaluru but will also have
presence in other metro cities in India.
Valuation:
Consideration for:
• the merger of NEPL is 6619 equity
shares of Rs.2 each for every 10000
Consideration:
Valuation for the purpose of a merger is
done by arriving values through multiple
methods and weights to be given to a
method. For listed company 75% weight
given to value arrive based on projected
cash flows and 25% weights assigned to
market rate value arrived based on the
guidelines. However, for unlisted entity
100% weight given to projected cash
flows. It is interesting to note that if 100%
weights given to projected cashflow even
in the case of listed company, valuation
per share of IBREL will be circa 10% higher
and IBREL promotors’ stake would have
been more than 10%.
equity shares of Rs. 10 each of IBREL.
• the merger of EOCDPL is 5406 equity
shares of Rs. 2 each for every 10000
equity shares of Rs. 10 each IBREL.
1. thirtieth calendar day from the
effectiveness of the IPPL demerger or
The Transaction:
Prior to the merger of EOCDPL with IBREL,
the existing shareholders of IPPL would
swap his share in exchange of EOCDPL
shares.
· the effective date for the purpose of
merger of NEPL with IBREL and
The Scheme:
'Sky.' IPPL filed a demerger scheme with
NCLT to demerge its commercial real
estate and appointed /effective date of
this part of the scheme will be post
demerger effective date.
Post internal restructuring as mentioned
above, two Embassy group unlisted
companies i.e., NEPL and EOCDPL are
amalgamated with IBREL.
Appointed date:
The appointed date shall be
· for the purpose of merger of EODCPL
with IBREL is later of
2. approval from various authorities
and other conditions. Thus, the Appointed
Date and effective date is based on the
approval of the other scheme filed by IPPL
Rational of the Scheme:
Is for Consolidation of operation and
business of amalgamating companies. no
doubt, the scheme also achieves following
objectives of parties to the scheme
1. The embassy group indirectly listing
its businesses.
2. To give exit or reclassify the existing
promotors as public shareholders and
Embassy group playing the role of
promotors without going through
takeover code and open offer procedures
3. Existing promotors exit without
selling their stake handover his listed co.
to Embassy group.
76%
23%
1%
Pre Merger SHP of IBREL
Promotors
Public
Other (DR and Employee Trust)
19.10%44.90%
9.80%
26.20%
Post Merger SHP of IBREL
Promotors
India Bulls
Embassy Group
Public
Blackstone & Embassy Institutional Investors
Shareholding pattern
The amalgamated company will caternot only to Bengaluru but will also havepresence in other metro cities in India.
In a scheme provided that if the shareholding of the
IBREL promotors in the amalgamated company falls
to or below 10%, the IBREL promotors shall reclassify
as public shareholders.
This is the ideal scheme for both the
parties in the present circumstances as
it does not require the acquirer i.e.,
Embassy group to sell out any cash to
increase its stake in the listed entity to
pay off the present promotors but also
no open offer is required to give exit to
public shareholders as otherwise may
be required under the takeover code.
For present promotors, the scheme will
provide better option to exit by selling in
the open market whenever they feel
valuation is right. It is also reducing risk
for public shareholders as it will have
better management and wider portfolio
of projects in different metro cities.
Jitendra Virvani (Embassy) in an
interview said our immediate focus
would be to generate liquidity of ₹10,700
crore by selling near completion/under
construction inventory, which requires
little additional capital of ₹200 crores.
The l iqu id i ty generated w i l l be
redeployed for planned projects and
other new market opportunities.
www.mergersindia.com www.mnacritique.com 15
ME
RG
ER
RBI merges Lakshmi Vilas Bank
with DBS Bank India
This is the first time the RBI has allowed a
foreign bank to rescue a struggling Indian
bank. In fact, DBIL became lucky in the
second attempt aer in 2018 it had
approached LVB to acquire about 50% of
the stake for a much higher valuation of Rs
100-Rs 150 per share. According to the
The Reserve Bank of India has merged
capital-starved Lakshmi Vilas Bank (LVB)
with the Indian subsidiary of Singapore’s
DBS Bank. The central bank had to go
ahead with the merger plan as there was
no credible revival plan to revive the bank
and protect depositors’ interest. Aer the
scheme of amalgamation came into effect
on November 27, DBS Bank India Limited
(DBIL) has received capital infusion of Rs
2,500 crore fully funded from DBS’ existing
resources. The amalgamation will provide
stability and better prospects to LVB’s
depositors, customers and employees
aer a long period of uncertainty.
resolution plan, DBS India will invest $335
million in the equity of the LVB for a 51%
stake even as the existing reserves and
surplus of the bank will be extinguished.
The merger is a very prudent step in order
to save the depositors and to mitigate the
systematic disruption associated with it.
To be sure, the merger will be a template
for the central bank to rescue other
struggling banks in the future. In fact, the
central bank had in October last year
rejected a proposal for LVB to merge with
Indiabulls Housing Finance Ltd.
Once the integration is complete,
customers of LVB can access a wider range
of products and services, including access
to the full suite of DBS digital banking
services. Moreover, DBIL is well-capitalised,
and its capital adequacy ratio remains
above regulatory requirements aer the
amalgamation. The bank’s Capital to Risk
Weighted Assets Ratio (CRAR) was at
1 5 . 9 9 % , a g a i n s t t h e r e g u l a t o r y
requirement of 9%, and Common Equity
Tier-1 (CET-1) capital at 12.84% was well
above the requirement of 5.5%. The central
bank had underlined that LVB’s losses
would have continued in the absence of
any feasible strategic plan, declining
advances and scaling non-performing
assets (NPAs).
As part of the amalgamation, RBI had
placed 94-year old LVB under one-month
moratorium, superseded its board and
capped withdrawals at Rs 25,000 per
depositor. The RBI had put the bank under
Prompt Corrective Action in September
2019. The central bank had placed Punjab
and Maharashtra Co-operative Bank under
its control and had placed Yes Bank under a
moratorium before preparing a scheme led
by State Bank of India and involving several
other lenders to rescue the private-sector
bank.
Saikat Neogi
16 Vol. XXIX Issue No. 10 January 2021
The governance standards of LVB started
deteriorating over the last few years. The
trouble started from 2016-17 when the
bank changed its focus from SMEs to large
businesses. The bank’s loan of Rs 720 crore
to Malvinder Singh and Shivinder Singh,
former promoters of Ranbaxy and Fortis
Healthcare went bad. The gross NPA of the
bank rose to 25% in 2020 from 10% in 2018
and the promoters have also pledged their
shares. The bank's losses jumped from Rs
585 crore in 2017-18 to Rs 836 crore in 2019-
20. As the financial condition of the bank
d e t e r i o ra t e d , t h e b a n k s t a r t e d
negotiating for merger with Indiabulls
Housing Finance, a NBFC company in
2019. However, RBI did not approve the
merger and LVB then started negotiating
a merger with Clix Capital.
What went wrong with
LVB?
In the 93rd Annual General Meeting of the
b a n k h e l d i n S e p t e m b e r 2 0 2 0 ,
shareholders voted against the seven out
of a total of 11 members from the senior
management including S Sunder, the
bank’s interim MD & CEO. They raised alarm
over the rise in bad loans and erosion of the
market cap of the bank. The RBI appointed
three members to look aer the daily
affairs of the bank along with the remaining
four senior officials of the bank.
Shareholders of LVB got a raw deal aer
the merger. At the time of bank mergers,
shareholders are usually given fresh share
of the merged entity based on a pre-
determined formula. But as LVB was cash-
strapped with a negative networth, the
shareholders value was written off. The
shares of the bank are going to be delisted
as per the Scheme of Amalgamation. The
bank’s shareholders challenged the
scheme of amalgamation in Chennai High
Court as their main concern was the
provision in the scheme which cancelled
their existing shares in the bank. However,
in an interim order, the court, while
declining a stay on the merger, directed
DBS Bank India to create a reserve fund
from which LVB’s shareholders will be
compensated if the court so orders.
Synergies for DBS India
DBS was the first foreign bank to receive a
banking licence aer the central bank
allowed foreign banks to set up a wholly
owned subsidiary. DBS Bank opened its
first office in Mumbai in 1994. The
subsidiary structure brings the lender on a
par with local banks, allowing them to open
branches anywhere in the country. Most
foreign banks in India operate as wholesale
banks and have niche retail customers.
Aer acquiring LVB, DBIL can now have a
pan-India footprint to compete with big
private sector banks such as HDFC Bank,
ICICI Bank and Axis Bank. DBS has been
named by Forbes in its 2020 list of the
World’s Best Banks. Based on a global
survey of 40,000 banking customers, DBS
was ranked No 1 in India out of 29
domestic and international banks present
in India.
DBS provides an entire range of banking
services for large, medium and small
enterprises and to individual consumers in
India. In 2016, DBS launched India’s first,
mobile-only bank – digibank, which now
has over 2.6 million customers. The merger
will help DBS India to expand its reach in
India and the bank’s growth curve in
Singapore is now saturated. At present,
DBS India has just about 30 branches in
India. The bank has a healthy balance
sheet, with strong capital support. As on
June 30, 2020, its gross NPAs and net NPAs
were low at 2.7% and 0.5% respectively,
according to data from RBI.
The merger will strengthen DBS Bank's
position in the country by adding new retail
and small and medium sized customers. It
will complement traditional physical branch
banking with its digital strategy in India. In
fact, Moody's Investor Service estimates
that DBS India's customer deposits and net
loans will increase by about 50 to 70% aer
the merger. At present, DBS has 2.5 million
customers in India spread across 24 cities
in 13 states. The merger will give it access to
www.mergersindia.com www.mnacritique.com 17
Integrating issues
While LVB is saddled with an old legacy of
systems, processes and products, DBS
Bank comes with a foreign banking culture.
It is more aggressive and focused on
productivity and return on investments.
LVB's 570 branches in 16 states and three
Union Territories. So, to set up such a large
bank network, it would have taken a long
time for DBS. As the bank was trying to
expand its presence all over India, the
merger was a great opportunity.
Regarding employees of LVB, the scheme
o f m e r g e r h a s n o m e n t i o n o f
rationalization. The cultural divide between
a traditionally run bank and a foreign bank
will be process and technology. Integrating
the two will be a key challenge and DBS
India will have to spend on training and
upskilling of employees of LVB for digital
banking, data analytics and cyber
security.
By allowing deep-pocketed foreign banks
to take over weak Indian ones will pave the
way for more mergers of weak banks in the
country. While RBI's decisive and swi
move will help protect depositors’ interests,
it has to closely monitor the merger
integration process of the two banks and
ensure that all the check boxes are ticked. A
proper integrat ion and seamless
functioning of the merged entity will open
new doors for new bank mergers and
resolve the bad loan problem that is
crippling the banking sector in the country.
INTERNATIONAL NEWSCROSS BORDER NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
JSW Steel's Italian subsidiary has signed an agreement
to acquire the remaining 30.73 per cent stake in GSI
Lucchini SpA of Italy for one million euros (about Rs 9
crore).
The balance share capital of GSI is already held by JSW
Steel Italy Srl. The manufacturing unit of GSI is located at
the port city of Piombino in Tuscany region, providing
easy access to export markets.
"The port-based facility also gives GSI the flexibility and
access to import raw material's bars/blooms and billets
The transaction is subject to fulfillment of conditions
precedent and other terms mentioned in the share
purchase agreement.
GSI is a producer of forged steel balls used in grinding
mills with predominant application in mining processing.
The brand is widely recognised in Europe and Africa, and
is among the prominent supplier in African mines.
to supplement supplies as when required."
“In summary, the proposed transaction provides a
unique opportunity for JSW to consolidate its stake in
GSI."
JSW Steel to acquire31% stake in Italy'sGSI Lucchini
With this acquisition, JSW Steel will havesuccessfully acquired three stressedassets through bankruptcy court
process produces and supplies Pig Iron
and Cement. It also produces Low Ash
Metallurgical Coke, Sinter and Power for
captive consumption in its integrated
complex. SPL is associate company of
ECL.
The Transaction
Exchange ratio: 59 shares of ECL of Rs 1
each for Every 10 Shares of SPL of Rs 10
each.
SPL is proposed to be merged with ECL
through scheme of merger. Appointed
date for the same is 01st October 2020.
18 Vol. XXIX Issue No. 10 January 2021
NATIONAL NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
RIL completesacquisition of IMGWorldwide LLC'sstake in sportsmanagement JV
Reliance Industries Ltd has completed acquisition of
IMG Worldwide LLC's stake in their sports management
joint venture IMG Reliance Ltd (IMG-R). "The company
has, on December 28, 2020, completed the acquisition of
equity shares of IMGR. Accordingly, IMG-R has become a
wholly-owned subsidiary of the company," Reliance
Industries said in a regulatory filing.
IMG-R is engaged in the business of creation,
management, implementation and commercialisation of
sporting, fashion and entertainment events in India.
IMG is a global leader in sports, fashion, events and
media, operating in more than 30 countries, and is a part
of the Endeavor network.
The nation's biggest company by market value, in a stock
exchange filing, had said it will buy IMG Worldwide's 50
per cent stake in IMG-Reliance Ltd (IMG-R) for no more
than Rs 52.08 crore in cash.
RIL had formed an equal joint venture with IMG
Worldwide, an international sports marketing and
management company, in 2010 to develop, market and
manage sports and entertainment in India.
Reliance Industries Ltd (RIL) announced it will buy out
IMG Worldwide LLC from their sports management joint
venture (JV) for Rs 52.08 crore.
JSL, Jindal Stainless (Hisar)boards approve merger inshare swap of 1:1.95
The Boards of Jindal Stainless Limited (JSL) and Jindal
Post the merger, JSL will be the single listed entity on the
stock exchanges with promoter holding at 57 percent
and remaining 43 percent by the public.
As per the proposed structure, the mobility business of
JSL Lifestyle Limited, a domestic subsidiary of JSHL
would be merged into Odisha-based JSL.
The consolidation of businesses will recast the merged
Stainless (Hisar) Limited (JSHL) today approved the
merger of JSHL into JSL in a share swap ratio of 1:1.95.
“The merger of JSHL in to JSL will induce a simplified
capital structure, expanding the turnover of the merged
business to Rs 20,000 crore. With 1.9 MTPA melt capacity,
the merged entity will be the only Indian company in the
league of top 10 stainless steel companies in the world,”
Abhyuday Jindal, managing director at JSL and JSHL was
quoted as saying.
With the appointed date of April 1, 2020, the merger
process is expected to be completed in H2 FY22 and
merger is subject to approvals from statutory
authorities, shareholders, creditors, and NCLT, said the
company in its release today.
The non-mobility businesses would be carved out as a
separate new entity, named Jindal Lifestyle Limited. Post
restructuring, Jindal Stainless Steelway Limited (JSSL)
and Jindal Lifestyle Limited will operate as Indian
subsidiaries, while overseas operational subsidiaries of
JSL in Spain and Indonesia will continue to operate as
business units of merged JSL.
Merger of Haryana-based JSHL into JSL will not only
enhance the company's product portfolio, along with a
360-degree reach to better serve its customers but will
also offer a seamless, single-window, pan-India, as well as
global network access to customers and further boost
the 'Just-in-Time' approach.
NATIONAL NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
BigBasket in talksto sell majoritystake to Tata Group
India's largest e-grocer BigBasket is in advanced
negotiations with the Tata Group to divest a majority
stake in favour of the salt-to-soware services
conglomerate, according to three people in the know. The
deal, which is still evolving, could see the Bengaluru-
based company sell around 50% stake for about $1
billion, the sources said.
Tata Group executives, privy to the discussions, said the
conglomerate is likely to execute the deal through its
digital arm — Tata Digital — and that (the investment in
BigBasket) "is just step one of several other similar tie-
ups and collaborations that the group is looking to strike
(in order) to scale its digital presence". ET had earlier
reported that the Tata Group has held talks with
BigBasket as well as ecommerce companies Snapdeal
and IndiaMart. "This is not an easy deal to pull off with so
China's internet giant Alibaba, which holds around 26%
stake in BigBasket, is expected to sell its entire
shareholding in the company along with a group of early
backers, said another person who did not want to be
identified. Other investors in the e-grocery company
include Ascent Capital, CDC Group and the Abraaj Group.
A Tata Group executive speaking to ET on the condition
of anonymity said the conglomerate is looking to acquire
internet companies as "scalability of business through a
combination of online and offline is seen as critical for
future growth".
In recent times, Tata Sons has also committed significant
capital to its retail arms such as Trent, which operates
Westside and Landmark, a bookstore chain, as well as
Infiniti Retail, a subsidiary of the Tata Group that runs
Croma stores.
The Covid-19 led lockdown has helped players like
BigBasket shore up order volumes amid a significant
many investors involved… but there should be some
finality to the talks in a couple of weeks," the sources said.
Separately, BigBasket has also held discussions, sources
said, to rope in a bunch of new investors like Singapore's
Te m a s e k , U S - b a s e d G e n e ra t i o n I nve s t m e n t
Management, Fidelity and Tybourne Capital, for a $350-
400 million financing round. The fundraising process,
which began earlier this year, coincided with Reliance
Industries announcing its intent to push grocery
eCommerce through JioMart.
www.mergersindia.com www.mnacritique.com 19
NATIONAL NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
In 2015, Jindal Stainless initiated a demerger to distribute
its debt of close to Rs 8,500 crore between four firms and
cut interest costs. Besides JSL, there were three other
entities. Both JSL and JSHL were separately listed, while
Jindal United Steel Ltd (JUSL) and Jindal Coke Ltd (JCL),
the other two, remained private companies.
entity as an integrated, modern and 'state-of-the-art'
manufacturing facil ity, bringing the diversified
technology, talent and R&D under one roof.
Jindal Stainless was into corporate debt restructuring
twice and this had triggered the demerger move back
then as there was no scope for further debt
restructuring as it would make the company a non-
performing asset. The demerger allowed all four
companies to operate independently.
The merger will lead to the realisation of enhanced
operational synergy, with JSL's proximity to port and raw
materials, along with world-class finishing lines, and
JSHL's strategic location around key domestic
consumption centres.
Furthermore, the merged ent ity wi l l present
reinvestment opportunities for growth by leveraging
ready infrastructure at Jajpur for cost-efficient
Brownfield expansions.
EID Parry to sellup to 2% stake in
CoromandelInternational
EID Parry India, promoter of Coromandel International
is looking to sell up to 2% stake or 58.5 lakh shares of the
fertiliser and chemicals company through open market
on Wednesday to raise upto Rs 483 crore, according to a
term sheet issued by Kotak Securities.
The sale price has been fixed at Rs 800 – 825 per share, a
discount of 3.2-6.1% to Tuesday's closing price of Rs
851.95. As of September 30, 2020, EID Parry India held
58.42% stake in the company.
Earlier in June, EID Parry sold 2% stake in Coromandel
International in the open market at Rs 629.191 a share to
raise about Rs 368 crore. The proceeds of sale was used
to bring down the debt of the company. EID Parry has
reduced its debt from Rs 5,125 crore on March 31, 2019 to
Rs 1,334 crore as on September 30, 2020.
Shares on sale are locked for 90 days and allocation of
shares to foreign portfolio investors is subject to the
headroom available as per the investment limits under
the applicable laws, according to the term sheet.
Every month M & A critique gives valuable insights to over 5000 Readers from Corporate World on-
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January 2021 150/-
Scheme of Arrangement
of JHS Svendgaard
Laboratories:
An attempt to do
miracle in value creation
but for whom?
ACQUISITION
MERGEREmbassy group listing its real estate
business without going through IPO process
Amazon-Future-Reliance Deal -
A Case Study
MERGERRBI merges Lakshmi Vilas Bank
with DBS Bank India
COV
ER
ST
OR
Y
Scheme of Arrangement
of JHS Svendgaard
Laboratories:
An attempt to do
miracle in value creation
but for whom?
Padam Singh
20 Vol. XXIX Issue No. 10 January 2021
The scheme is an attempt tolist minuscule business.
JHS Svendgaard Laboratories Limited
(JSLL) is listed company and it engaged in
the business of manufacturing and selling
o f To o t h b r u s h e s , To o t h p a s t e s ,
Mouthwash, Denture Tablets, and other
allied oral care product. Apart from
working on its own brands the company
also offers contract manufacturing
partnership to brands in the domestic
and international market.
JHS Svendgaard Retail Ventures Private
Limited (JSRVPL) is engaged in the retail
business of selling the complete range of
Patanjali branded products at major
airports in India. 99.82% equity shares
hold by JSLL and balance shares are hold
by the promoters of JSLL directly. Shares
acquired in April 2018. The company is
currently operating four retail outlets at
IGIA, Delhi and Raipur, Chhattisgarh.
JHS Svendgaard Brands Limited (JSBL)
is engaged in the business of selling
toothbrushes, toothpastes, mouthwash,
and other oral care products under
“Aquawhite” brand name. 42.68% equity
shares hold by JSLL (JHS Svendgaard
Laboratories Limited), Promoters of JSLL
(JHS Svendgaard Laboratories Limited)
holds 9.23% and remaining stake is held
by others.
The Transaction
Steps:
1. F I R S T D e m e r g e r o f ‘ R e t a i l
Investment Division’ of JSLL (JHS
Svendgaard Laboratories Limited) into
JSRVPL (JHS Svendgaard Retail Ventures
Private Limited) followed by.
2. Merger of JSBL with JSLL.
Demerger:
Appointed date for the transaction is 1st
April 2020
The Scheme is in two parts first
demerger followed by merger for
consolidation. Let us first discuss
demerger.
Retai l Investment Divis ion means
investment by JSLL in the equity shares
of JSRVPL (JHS Svendgaard Retail
Ventures Private Limited).
The key reason for demerger is
separation of retail business into listed
Rational for the Scheme:
A s d e fi n e d i n t h e s c h e m e, T h e
Demerged Undertaking i .e. Retail
Investment Division includes only
shares in subsidiary company which is
into retail trading business of only
Patanjali products at various airports.
Primary question from the perspective of
Income Tax could be whether Sole
transfer of Shares of Subsidiary company
constitute “Undertaking” as per section
2(19AA) of Income Tax Act 1961 and
transfer of such undertaking on Going
Concern Basis
Definition of ‘Undertaking’ provided in
section 2(19AA) of the Income Tax Act,
1961 is "undertaking" shall include any
entity.
Swap ratio in the case of demerger is 1
share of JSRVPL (JHS Svendgaard Retail
Ventures Private Limited) against 10
shares JSLL i.e., 1/10th capital of JSLL. So,
capital of the proposed company to be
listed will be ₹6.5 crores against sales of
just ₹2.6 crores with negative EBIT of Rs
54 lacs. This match with the present paid
up capital of the JSRVPL. One may ponder
whether it will be possible for any
company to be listed on the main
exchange with similar financials.
www.mergersindia.com www.mnacritique.com 21
22 Vol. XXIX Issue No. 10 January 2021
A s t h e i nve s t m e n t i n d e m e rg e d
undertaking is Rs. 6.5 crores which
constitute circa 4% of net worth of JSLL,
means transferred business does not
l ike ly to sat isfy the definit ion of
undertaking as per section 180 of
Companies Act 2013.
Taxation:
Though the said definition is not relevant
as far as Sec 230 of the companies
act,2013 is concerned.
Definition of Undertaking as given in the
perspective of Companies Act 2013
according to section 180:
( i ) “ u n d e r t a k i n g” s h a l l m e a n a n
undertaking in which the investment of
the company exceeds twenty percent of
its net worth as per the audited balance
sheet of the preceding financial year or an
undertaking which generates twenty
percent of the total income of the
company during the previous financial
year.
part of an undertaking, or a unit or
division of an undertaking or a business
activity taken but does not include
individual assets or liabilities or any
combination thereof not constituting a
business activity.
(ii) the expression “substantially the
whole of the undertaking” in any financial
year shall mean twenty per cent. or more
of the value of the undertaking as per the
audited balance sheet of the preceding
financial year.
I f the proposed demerger is not
considered as in compliant of Sec 2(19AA)
of the income tax act, then the demerger
is not exempted transaction under the
provisions of the income Tax Act, 1961. As
a result , taxation in the hands of
demerged company, resulting company
and shareholders may arise which we
However, for transfer of such investments
to other company would have been
possible even without going through
demerger scheme or even without
approval of shareholders as the same is
within the powers of the board.
As a part of Undertaking resulting
company not getting anything in fact
those share s are cance l led , and
shareholders of Transferor company get
shares in the Transferee company in
proport ionate to their holding in
Transferor company.
discuss as follow.:
Taxation in the hands of
Demerged co.
Section 47(vib) exempts transfer of
assets in the course of demerger. the
exemption is not available if the demerger
is not a qualified demerger. so, one may
examine to see that such a transfer is
liable to tax under Sec 45 even though
there is no consideration received by The
Transferor Company. for the exemption
from the definition of transfer of any
capital asset in the course of demerger,
hence, we need to examine whether the
Assesses officer can levy tax under
section 50CA on the ground of no
/inadequate consideration. Though The
demerged company’s defense that it
never received any consideration and
o n l y i t s s h a r e h o l d e r s r e c e i v e d
consideration in the form of shares of
Resultant company wi l l save the
company from the liability.
Taxation in the hands of
Resulting co.
As per the scheme, shares were cancelled
and issue new shares to the shareholders
of JSLL. However, by applying rational of
section 56(2)(x) of Income Tax act 1961
may get taxed this as income from other
sources as the resulting company
r e c e i v i n g s h a r e s w i t h o u t a n y
consideration. Here also one may be able
So, in fact it seems JSBL shareholders get
500% of value (i.e. 150 shares as against
The second limb of the scheme is merger
of JSBL with JSLL. we need to examine
valuation method used for valuation of
the shares of JSBL, unlisted group
company. Let us examine valuation
given to unlisted company.
Merger:
According to valuation report the
v a l u a t i o n o f J S B L , i n co u r s e o f
amalgamation is derived by giving 10%
weighted to Book value and 90% to value
derived by sales multiple. So, in the case of
JSLL also one uses sales multiple as one
of the methods, its value per share will be
c i rca 3 t ime s that o f JSBL . Just
academically, if one considers method as
mentioned above, swap ratio will work out
circa 30 shares of JSLL for every 100
shares of JSBL.
to argue that property/shares were never
received by the company and directly
issued to the shareholders of JSLL.
Taxation in the hands of
shareholders:
One may can assume that shares of
resulting co. received by the shareholders
of demerged co. is free of cost and by
applying section 56(2)(x) is may get taxed
in the hands of shares holders However,
shareholders have good defense that it
received shares against it holding in JSLL
and as result of the demerger value of its
s h a r e s i n J S L L w i l l g o d o w n
proport ionate ly tax ing ind iv idua l
shareholders by the tax department may
not be very easy to implement.
in case of merger of unlisted companywith listed company, SEBI Prescribedvaluation methods seems to workagainst interest of the minorityshareholders of listed entity.
*Price taken as per valuation report
www.mergersindia.com www.mnacritique.com 23
Logistics & WarehousingBusiness Undertaking
Retail & Wholesale BusinessUndertaking
Manufacturing of FMCG &Apparel Business Undertaking
Insurance BusinessUndertaking
Other Activities Undertaking(Including JN with MTC)
Remaining Business Undertaking with FEL
SETP 2Slump Sale of Business
Slump Sale into RRFLLfor ₹24,012 Crores
Slump Sale into RRVLfor ₹701 Crores
Fundraising from PE of₹37,000 Crores was done in RRVL
Reliance Retail Venture Limited(RRVL) A Subsidiary of RJL
Reliance Retail & FashionLifestyle limited (RRFLL)
(XXXXXXXXXXXX)
Both WoS have similar Businessesof Organized Retail and Wholesale
Reliance Retail Ltd (RRL)
www.mergersindia.com www.mnacritique.com 23
30 shares) as compared to fair value of
shares of JSLL on like-to-like basis
Interestingly, despite having significantly
g r e a t e r r e v e n u e , t h e m a r k e t
capitalization of JSLL is much below its
revenue for FY 2020 and on other hand,
valuer has assigned 5.34 multiple to
revenue to derive the valuation of JSBL.
one needs to evaluate how it is fair to the
public shareholders.
Financials
Now we look at financials of JSBL, the
Now let us go to change in shareholding
structure of JSBL just before the
announcement of merger.
From the above calculation, valuation has
increased three times between 31st
July,2020 and 8th October,2020.
Swap Ratio for merger of JSBL with JSLL
is 150 equity shares of Rs. 10 each of JSLL
for every 100 equity shares of Rs. 10 each
of JSBL. Based on that shareholders of
JSBL get value worth Rs 30 for its holding
in JSBL in the form of shares of listed
company JSLL.
unlisted entity.
• In FY 2019 JSBL having revenue from
operation ₹6.45 Crore which turns into
losses of ₹7.18 crores. On above turnover,
the company incurred employees’ cost ₹
4.24 crores and other expenses ₹ 5.26
crores. The company raised ₹ 14.26 crores
out of which ₹ 4.86 crores used for
investment. It purchased goods of ₹ 5.26
crores out of which ₹ 3.94 crores purchase
from parent co. JSLL. Outstanding
balance of trade payable in FY 2019 is ₹
3.26 crores out of which ₹ 2.66 crores
belongs to JSLL.
As against JSLL gets equity valuation of
RS 142 crores having NAV of ₹ 197 crores.
Its turnover for FY 2020 was ₹132 crores
and PAT ₹1.77 crores. One must also
consider that JSLL is listed company since
2006.
• In FY 2020, gross revenue is Rs 8.98
crores.
• So JSBL gets equity valuation of Rs
55 crores having NAV of 16 crores and
incurring losses.
Other anomalies in
compliances
As per valuation report the date of Valuer
Appointment , Valuat ion date and
Valuation Report Date single date i.e.,
9/10/2020. Further Audit Committee
meeting for approval of the Scheme
happened between 12 pm to 2.30 pm on
the same date. One may need to
understand how entire process along
with fairness report (which is required
aer valuation report but before audit
committee meeting) arranged in such a
brief time span.
Further also note that two non-executive
d i r e c t o r s r e s i g n e d j u s t b e f o r e
announcement of the scheme, out of two
one is independent director.
in case of merger toarrive at swap ratio,ideally should havesimilar parametersto arrive at thevaluation of each ofthe company.
The scheme rationale does not match
with various facts, circumstance,
compliances pre and post scheme.
Both JSLL and JSBL raised funds by
way of QIP (Qualified Institutional
Placement) just before the scheme.
The scheme proposes to create a
listed entity with insignificant assets
and revenue which otherwise become
difficult to get listed. The merger ratio
is skewed in favour of unlisted
company. independent directors
resigned just before the approval of
the scheme by the board. it will be
challenging for the company to
satisfy various regulatory authorities
that it is fair to all the stakeholders.
Please share your experiences/feedback with
us on [email protected]
Preferential and Right issue of shares:
Amount
10,00,000
13,51,113
1,48,890
Date
08-10-2020
31-07-2020
31-07-2020
300,00,000
135,11,130
14,88,900
Non- Promotors
Promotors (Nikhil Nanda)
30
10
10
PriceNo.Promotors/Non-Promotors
JSBL
100
10
1000
Particulars
No. of shares
Price
Total Value
JSLL
150
20.96*
3144
Calculation of Premium gettingby JSBL shares holders
*Price taken as per valuation report
On�M&A�and�Joint�Venture�
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24 Vol. XXIX Issue No. 10 January 2021
January 2021 150/-
Scheme of Arrangement
of JHS Svendgaard
Laboratories:
An attempt to do
miracle in value creation
but for whom?
ACQUISITION
MERGEREmbassy group listing its real estate
business without going through IPO process
Amazon-Future-Reliance Deal -
A Case Study
MERGERRBI merges Lakshmi Vilas Bank
with DBS Bank India
NATIONAL NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
SBI Life acquires9% stake in PaisaloDigital for₹186.20 crore
SBI Life Insurance Company said it has acquired nearly
9% stake in non-banking finance company Paisalo Digital
for about ₹186.20 crore through the open market.
It is not a related party transaction, the insurer added.
Paisalo Digital has a market capitalisation of ₹2,204.69
crore as on December 24, 2020.
Incorporated on March 5, 1992, Paisalo Digital provides
loans to individuals, SME and MSMEs and to Joint Liability
Group (microfinance) through 129 branches across the
country.
SBI Life has acquired a total of 38,00,000 equity shares
equivalent to 8.99% at Rs 489.99 per share for a cash
consideration as an ordinary course of business on the
stock exchange on December 24, it said in a regulatory
filing.
The promoters hold 46.07% stake in the company,
foreign portfolio investors 23.91%, LIC 3.53% and others
26.49%.
India clocks $80 bnof M&A activity,PE deals in '20: report
Despite the pandemic, economic slide and geopolitical
tensions, deal values in 2020 kept apace with the previous
year, reaching $80 billion across 1,268 transactions,
according to a PwC India report.
Private equity (PE) activity kept pace with last year,
recording investments of $38.2 billion.
This marked a 7% increase in value compared to 2019.
To be sure, 25% of the deal value was attributable to sizeable
inbound investments in just one company, Jio Platforms. In
terms of volume, the number of deals dropped significantly
from 1,945 transactions last year to 1,268.
Domestic consolidation continued to drive M&A activity in
India, accounting for nearly 50% of the total deal value. Given
the volatility, uncertainty and complexity of the current
times, PwC expects this trend to continue, it said in the
report.
“The lockdown in India severely impacted almost every
sector. Several discretionary consumer businesses in the
retail sector struggled to stay above water, creating a
number of consolidation and expansion opportunities.
Reliance Retail Ventures acquired the retail, wholesale,
logistics and warehousing businesses of Future Group for
$3.3 billion. The acquisition was the largest domestic deal
recorded in 2020," said PwC.
On the private equity (PE) front, it said the number of
buyouts witnessed a sharp decline from 2019. “This could be
due to the risk-averse approach adopted by several funds
earlier this year, as well as the need for smaller rounds of
cash infusion in cash-strapped businesses. Steered by the
need for value creation, preservation and enhancement,
control will be a key element for most investors in future,"
PwC said.
Venture capital funds' early-stage investments maintained
last year's levels. “Global investors reiterated confidence in
India's startup space as well as entrepreneurial capabilities,
and were quick to address any gaps created by international
conflicts," it said. PE funds infused nearly $5 billion in real
www.mergersindia.com www.mnacritique.com 25
26 Vol. XXIX Issue No. 10 January 2021
NATIONAL NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
estate this year, but 60% of the investment was on account
of Brookfield's and Mitsui's investments in real estate firm
RMZ Corp. Excluding these, investments in real estate
remained muted.
Garment Mantraacquires 83.8% stakein Jannat Fabrics,to pick up 100% soon
Garment Mantra Lifestyle Ltd, the erstwhile Junction
Fabrics & Apparels Ltd), has acquired an 83.8 per cent
stake in Jannat Fabrics and Apparels Private Limited.
The management is expecting to acquire 100 per cent
stake in the next few months to make it a wholly-owned
subsidiary of Garment Mantra. This will help Garment
Mantra in running the entire textile value chain from
supplying yarn/fabric to the mills for knitting, dyeing,
printing, compacting and into retailing as well. Moreover,
it will also improve the operational efficiency and reduce
operational overheads within the group.
Prem Aggarwal, chairman & managing director, said the
company is in the process of acquiring a majority stake in
Twenty Twenty Trading LLP “Price Mantra” as part of the
company's efforts to consolidate its group operations.
Govt puts IBC onhold till March
Fresh corporate bankruptcy filings for loans defaulted
during the pandemic will remain suspended till the end of
the financial year, with the government extending the
ongoing freeze.
The Insolvency and Bankruptcy Code (IBC) was initially
suspended for six months from March, which was later
extended by another three months ending December.
Sitharaman said at an interaction with the Bangalore
Chamber of Industry and Commerce that the
government has extended various deadlines and eased
compliance requirements to ensure companies were not
stressed during the pandemic.
“Even suspension of the IBC has been extended even
further from December. I think we have moved to say that
it can be up to March 2021. The entire year has had the
Insolvency and Bankruptcy Code suspended and rightly
so because every industry has gone through major
stress because of the pandemic and nobody could be
drawn towards insolvency process, which may have
occurred during the pandemic," Sitharaman said.
Union finance minister Nirmala said the government has
now decided to extend the suspension for a full year.
Extending the suspension of bankruptcy action during
the pandemic would keep alive both viable as well as
unviable companies, a compromise that policymakers
have to accept in order to ensure that the viable ones
survive.
On the other hand, liing the suspension on the
Insolvency and Bankruptcy Code could expose even
viable companies to the possibility of liquidation if
investors do not bid for the assets.
Former Reserve Bank governor Raghuram Rajan said
that suspending fresh bankruptcy cases was
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unfortunate as it viewed bankruptcy resolution as a
punishment and not necessari ly as a way of
restructuring capital structure and ownership, Mint
reported.
Out of the over 4,000 bankruptcy cases admitted to
tribunals so far under Insolvency and Bankruptcy Code,
turnaround plans have been cleared in the case of 277
and liquidation proceedings are on in over 1,000 cases at
the end of September, according to data available with
the bankruptcy board.
Insolvency and Bankruptcy Board of India chairperson
M.S. Sahoo said in an interview on Monday that the
objective of suspending initiation of bankruptcy
proceedings was to protect businesses that are
otherwise viable and yet could be liquidated for want of
resolution applicants in the wake of the pandemic.
Bankruptcy resolution proceedings are going on in the
case of corporate defaults that took place before March
(non-covid defaults).
Moreover, this would also establish Daikin as a complete
player into the domestic commercial air-conditioning
market offering a complete solution into the segment.
The deal is estimated to be around Rs 100-125 crore.
Cit izen Industries has manufacturing units at
Ahmedabad and Bengaluru, employing around 650
people which includes R&D engineers and service
technicians.
Daikin India has done air-conditioning projects of around
32 airports in the last three years and with this
acquisition, the company can now provide airside
maintenance and insulation service also, Jawa said.
Integration of the Citizen's business would result in
acquisition of ongoing air-side maintenance contracts,
expansion into the applied and VRV solution business
(including airside), a horizontal collaboration with
American Air Filter (AAF) and catalyse economies of
scale at the Daikin India Neemrana, Rajasthan factory
and its R&D centre, he added.
"This is the fourth largest manufacture and distributor of
applied secondary equipment. It has large sales channels
in the pharmaceutical industry and others," he said.
Air Handling Units are mainly used for maintaining air
qual ity such as cool ing, heating, humidifying,
dehumidifying and filtration. It is also used for air
quantity and circulation of air in the specified area
through properly designed air distribution network.
“Now we will have a full range - controls, the applied
chillers and airside. This would also accelerate our cost
"This acquisition will provide prominence to Daikin India's
current infrastructure influence and help increase
penetration across various applications," he said.
Daikin acquires airhandling unit businessof Citizen Industries
Daikin Airconditioning India has acquired the air
handling business of Ahmedabad-based Citizen
Industries, a move which will enhance its product
positioning into the commercial air-conditioning market,
a top company official said. The move would help Daikin
to strengthen its presence in the fast-growing
commercial air-conditioning market and expects the
segment to increase its contribution up to 35 per cent of
its turnover from next year.
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reduction by utilising the Nimrana, Rajasthan based
procurement R&D centre. The merger would also help to
upgrade some of the products at the same time and
using the cross company benefit," Jawa said adding that
it will also benefit its customers also.
However, he did not share the amount but said the
company would continue to look for such opportunities
to be a leading player into the Indian residential and
commercial air-conditioning segment.
"We have reserves for acquisitions and wherever we will
see an opportunity to acquire which is related to the
business of air conditioning, we are going to use that,"
Jawa said.
Daikin Airconditioning India's business last year was
worth over Rs 5,000 crore and around 75 per cent of it
came from the residential cooling business and the rest
from commercial business.
“With this enhancement, our commercial business will go
up from 25 per cent to 35 per cent next year onwards.
This will enhance our position in the segment," he added.
"This is to inform you that the Board of Directors of the
Company at the meeting, have approved the acquisition
of film production and distribution business as a going
concern, on a slump sale basis from Zee Studios Limited
(formerly known as Essel Vision Productions Limited), a
wholly-owned subsidiary of the Company, for a cash
consideration, on such terms and conditions as
contained in the Business Transfer Agreement ('BTA'),"
the company said in the regulatory filing.
"The acquisition of film production and distribution
business would inter alia result in growth opportunities in
line with the strategic growth opportunities in line with
the strategic Company," Zee Entertainment said in a
statement.
Zee Entertainment Board also approved the transfer of
the digital publishing business division of the company to
Rapidcube Technologies (Rapidcube) through a
Business Transfer Agreement.
Started in 2007, Zee Studios Limited is engaged in the
business of TV content development, film production
and distribution. As on 31 March, the turnover of film
production and distribution business stood at ₹124.11
crore.
from Zee Studios. Formerly known as Essel Vision
Productions Limited, Zee Studios is a wholly-owned
subsidiary of the company.
"This transaction comprises the acquisition of the
business undertaking pertaining to Film Production and
Distribution business as a going concern, on a slump sale
basis from Zee Studios Limited," Zee entertainment said.
It will take approximately two months to complete the
acquisition, Zee Entertainment said.
Zee Entertainmentacquires film production,distribution bizfrom Zee Studios
Zee Entertainment Board on Thursday approved the
acquisition of film production and distribution business
28 Vol. XXIX Issue No. 10 January 2021
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Formed in 2006, Tata Marcopolo Motors was a 51:49 joint
venture between India's largest commercial vehicle (CV)
manufacturer and Marcopolo S.A., also one of the largest
bus manufacturers globally.
“Tata Motors and Marcopolo S.A. have entered into a
share purchase agreement where the company will
purchase the balance 49% shareholding in Tata
Marcopolo Motors Ltd or TMML for a cash consideration
of ₹99.96 crore. Post the purchase, TMML will become a
wholly owned subsidiary of the company," the company
said in a note to BSE.
Tata Marcopolo Motors was one of the first bus
manufacturers to introduce low-floor passenger buses
for public transportation in Delhi, Mumbai and other
cities. A low-floor bus has relatively lower ground
clearance as compared to regular buses thus making it
comfortable for the passengers to step in.
“Aer a successful venture in India, and as a consequence
of its refreshed business strategy, Marcopolo S.A. has
decided to exit from the joint venture and offered to sell
its 49% shareholding in TMML," the company said.
The joint venture manufactured buses at Tata Motors'
production units in Lucknow and Dharwad where it builds
bus bodies on chassis supplied by the homegrown CV
maker. The vehicles are marketed by Tata Motors under
its Starbus and Starbus Ultra brands.
Tata Motors Ltd (TML) has entered into a share
purchase agreement with Brazilian bus and coach
manufacturer Marcopolo S.A. to buy out the latter's 49%
share their joint venture Tata Marcopolo Motors Ltd
(TMML) for ₹99.96 crore, the company said in regulatory
filing on Thursday morning.
While all technologies around the bus body products
currently manufactured by the company will continue to
vest with TMML, Marcopolo will continue to license the
Marcopolo trademarks to TMML for a minimum period of
3 years, Tata Motors said, clarifying that the transaction
would not impact the bus maker's operations including
sales and service of existing customers.
“Tata Motors, Marcopolo S.A. and TMML intend to
maintain an open channel for future collaboration
opportunities around bus body designs and technical
consulting services," it added.
Adani group sellsa part of its stakein Snowman Logistics
Tata Motors to buypartner's share inTata MarcopoloMotors for₹100 crore
Adani Logistics Ltd, a part of the diversified Adani
group, has sold almost a fourth of its stake in Snowman
Logistics Ltd. Adani Logistics had acquired the stake
through an open offer it had initiated in March at ₹44
apiece in a failed attempt to take promoter stake in
Snowman.
Adani Logistics sold nearly 12.7 million shares or a 7.61%
stake in Snowman between 27 November and 14
December, as per data from the exchanges. These were
sold at an average price of ₹59.21 a share, totalling nearly
₹75 crore. Adani now has 30.7 million shares or a 18.39%
stake in Snowman.
Adani Logistics had struck a deal in December 2019 to
buy a 40.25% promoter stake in Snowman, along with an
open offer to take another 26% from public shareholders.
Adani was to pay ₹296 crore for the stake and ₹191 crore
more for the public shareholding. However, the deal to
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On 11 May, Gateway Distriparks, the promoter of
Snowman, said that the December pact to sell its stake in
Snowman was no longer in force. On 22 May, Gateway
said it has initiated arbitration proceedings against the
Adani group.
acquire the promoter stake did not go through, even as
the open offer triggered by it was successfully
completed, thus landing Adani a 26% stake in Snowman.
“Adani Logistics shall not be involved in the day-to-day
management and shall not have a right to nominate or
appoint any director on the board (or committee(s)) of
Snowman," the exchange filing notifying the settlement
said.
"The combined capabilities of Wipro and PARI will help
broaden its offering, expand global footprint, and
strengthen its ability to forge deeper customer
Wipro Infrastructure Engineering said on Thursday it
has signed a definitive agreement to acquire Precision
Automation and Robotics India (PARI).
relationships in India and overseas," the former said in a
statement.
Founded in 1990, PARI has significant overseas presence.
The company has deployed over 1,500 automated
systems to more than 75 customers globally. It has been
delivering automation solutions from its facilities in Pune
(India) and Detroit (US).
“We ventured into industrial automation business with
the vision to be among the leading players globally. Over
the last few years, we have built significant capabilities
and partnerships. With PARI's addition to Wipro family,
our combined strength makes us a complete industrial
automation company capable of serving customers
globally and offers significant growth opportunities in
the future," said Pratik Kumar, CEO, Wipro Infrastructure
Engineering.
This is WIN Automation's second acquisition so far. In May
2019, it had acquired Bengaluru-based Incite Cam
Centre's automation business to enhance capabilities to
offer integrated end-to-end automation solutions.
WIN Automation and PARI together will now be able to
address the entire stream of industrial automationz
solutions, including turnkey physical automation
projects as well as digital factory initiatives to customers,
the company said.
Wipro Infrastructureto acquire industrialautomation firm PARI
30 Vol. XXIX Issue No. 10 January 2021
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E-commerce company Hut Group said on Tuesday it
would buy Dermstore, an online retailer owned by Target
Corp, for $350 million in cash as it looks to bolster the
presence of its beauty brands in the U.S. market.
The British company, which owns retail brands such as
Lookfantastic and skin care group ESPA, also bought UK-
based Claremont Ingredients and David Berryman for
59.5 million pounds ($80.29 million), looking to scale up its
drinks business with the aim of developing flavours
tailored to local tastes across the globe.
The Hut Group said the Dermstore deal would help scale
up its beauty box business while speeding up growth of
its own brands through a large U.S. customer base.
The company said it was expecting Dermstore to add
sales of around $180 million and adjusted core earnings
of around $4 million for 11 months of Hut Group's 2021
financial year.
Hut Group, which went public in September, said it was
expecting an antitrust clearance for the Dermstore deal
in late Jan. 2021.
disclosed, will see the Wall Street bank integrate
cxLoyalty's technology platforms, full service travel
agency, gi card, merchandise, and points bank
businesses into its Chase cards program.
“People across the globe want to vacation and travel
again, and hopefully that will become a reality for many in
the near future,” Marianne Lake, head of JPMorgan's
consumer lending business, said in a statement.
“Acquiring the travel and rewards businesses of
cxLoyalty will provide enhanced experiences to our
millions of Chase customers once they are ready,
comfortable and confident to travel.”
Tokyo-based Orix is purchasing an 80% stake from
Elawan's management and Spanish industrial company
Acek, company spokeswoman Yuka Kanaoka said
Monday. With an additional capital injection later, the deal
is worth about 100 billion yen ($965 million), she said.
Orix Corp. agreed to buy Spain's Elawan Energy, the
Japanese financial conglomerate's first deal to acquire a
majority stake in an overseas renewable power
company.
The transaction is expected to close in the second
quarter of 2021, subject to receipt of regulatory
approvals and satisfaction of customary closing
conditions, Orix said in a statement.
UK's Hut Groupto buy onlineretailer Dermstorefrom Targetfor $350 million
Orix to Buy SpanishEnergy Firm Elawanfor About $965 Million
JPMorgan to buythird-party loyalty programunit of cxLoyalty
JPMorgan Chase & Co said on Monday it would buy the
global loyalty division of cxLoyalty Group Holdings Inc, a
third-party credit card loyalty program service provider.
The transaction, whose financial terms were not
32 Vol. XXIX Issue No. 10 January 2021
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Elawan develops and operates wind and solar power
projects in Europe and the Americas. It has 714
megawatts of operational projects, more than 460
megawatts under construction and a development
pipeline of over 10 gigawatts.
Orix has been ramping up investment in renewable
energy at home and abroad in recent years. In
September, Orix agreed to buy a roughly 20% stake in
Indian renewable energy developer Greenko Energy
Holdings for $980 million, the conglomerate's biggest
investment in the sector overseas.
“Elawan is an ideal platform to further support the
growth of Orix renewable energy business globally,”
Hidetake Takahashi, head of energy and eco-services
business headquarters at Orix, said in the statement.
The acquisition will expand Orix's global renewable
energy operations as it broadens a business portfolio
that ranges from leasing to banking and real estate.
Acek, which also owns car parts maker Gestamp
Automocion SA, has been selling stakes in renewable
assets.
The Association of European Businesses (AEB), which
tracks sales of new passenger cars and light commercial
vehicles in Russia, expects the country's car market to fall
by 13.5% to 1.522 million vehicles this year.
“If we talk about the plant in Shushary - yes indeed, it is
our second plant, now we are working on possible
scenarios to use this asset,” said Alexey Kalitsev, head of
Russia's Hyundai unit.
The GM factory with a capacity of up to 100,000 cars per
year was built in Shushary in the suburbs of St.
Petersburg in 2008 but closed in 2015 as part of GM's
decision to reduce its international operations.
The deal was closed in early November, Tikhonravova
said, adding that it was too early to say when production
would start due to the pandemic.
Hyundai and its partner Kia already have a factory in
Russia with a manufacturing capacity of more than
200,000 vehicles per year. The two carmakers sold more
than 400,000 vehicles in Russia last year.
China's ByteDance is in talks to buy into mobile games
publisher CMGE Technology Group Ltd, four people with
direct knowledge of the matter told Reuters, as the
owner of short video app TikTok moves to strengthen its
next pillar of growth.
A CMGE spokesman said the company is not in talks to
sell a stake to ByteDance. A ByteDance source said it had
ByteDance in talksto buy stake in mobilegames firm CMGE – sources
Hyundai buys GM'scar plant in Russia'sSt. Petersburg
South-Korean automaker Hyundai Motor has
completed the acquisition of a General Motors factory in
Russia's St. Petersburg, Hyundai spokeswoman Yulia
Tikhonravova told reporters at an online conference on
Tuesday.
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The talks come as the gaming industry continues to
benefit from COVID-19 pandemic countermeasures which
have forced people to stay at home, boosting game
downloads.
ByteDance has already been relatively successful with
casual mobile games that mainly make money through
advertising. It plans to release its first “hardcore” game in
the April-June quarter, said two other people with
knowledge of the matter. Hardcore games can be a
steady source of revenue as users tend to keep playing
popular titles for years and are willing to make in-app
Market leader Tencent Holdings Ltd proposed a $1.5
billion acquisition of Leyou Technologies Holdings Ltd in
August. That made CMGE more of a target for
ByteDance, said two of the people.
ByteDance plans to buy part or all of the 27.6% CMGE
stake held by Fairview Ridge Investment Ltd, controlled
by CMGE chairman Xiao Jian and vice chairman Sin
Hendrick, said two of the people.
Eight-year-old ByteDance has identified gaming as its
next strategic growth area and has been scouting for
investment opportunities for months to build up its
gaming portfolio, three of the people said.
A successful transaction could make ByteDance CMGE's
single largest shareholder, said one of the people. The
deal is yet to be finalised and is subject to change, the
person said.
held talks with CMGE but was not interested in buying
into the company.
ByteDance is looking to offer HK$4 to HK$5 ($0.52 to
$0.64) per share to purchase the stake, said another
person. The range represents a premium of 30% to 62%
above the stock's Monday close of HK$3.08.
purchase for items that enhance game play, such as
weapons.
ByteDance entered gaming in early 2019 with casual
titles. By the end of last year, 13 of its games had become
hits on Apple Inc's App Store in China. It has a games
division with around 2,000 employees working on
hardcore games.
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Toscafund to buy UKbroadband firm TalkTalkin $1.5 billion deal
The deal has the backing of TalkTalk founder and
chairman Charles Dunstone, who owns nearly 30%. He
said he was pleased to have the opportunity to continue
to be a major shareholder.
TalkTalk investors can receive cash or unlisted shares.
The value of the 97 pence-per-share agreed offer is
unchanged from a proposal from Toscafund, the second
largest shareholder in TalkTalk with a 29.5% stake, on Oct
8.
The buyers said TalkTalk would be able to access more
debt and equity options as a private company and would
not face the regulatory burdens of being listed.
British broadband company TalkTalk said on
Thursday it has agreed a 1.1 billion-pound ($1.5 billion)
takeover by shareholder Toscafund and private-equity
investor Penta.
“Being a private company would allow us to accelerate
adoption and focus on our role as the affordable provider
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“The telecoms industry is going through a fundamental
re-set and we are keen to play our part in it.”
of fibre for businesses and consumers nationwide.
TalkTalk provides broadband, fixed-line, TV and mobile
services to more than 4 million people.
Tosco-Penta said TalkTalk had performed resiliently
through the COVID-19 pandemic, which has underlined
the vital importance of broadband, but there had been a
material decrease in its share price.
The recommended deal came as TalkTalk published it
first-half results, showing a 9 million pound hit from
COVID-19. Headline revenue fell 6.2% year-on-year to 717
million pounds, it said, while headline core earnings were
down 12.9% to 122 million pounds.
Chief Executive Tristia Harrison said: “Lockdown has
taught us that fast, reliable and affordable connectivity is
more important than ever, and we have seen excellent
network performance despite a 40%+ increase in data
usage.”
Peloton to buy peer Precorin $420 million deal
IBM to buy Europeancloud startup Nordcloud
International Business Machines will acquire European
startup Nordcloud, the latest in a series of acquisitions
for the 109-year old firm preparing a mega spin-off to
focus on cloud computing.
34 Vol. XXIX Issue No. 10 January 2021
Demand for streaming exercise services and home work-
out equipment's soared during the COVID-19 pandemic
Exercise bike maker Peloton Interactive Inc said on
Monday it would buy peer Precor in a deal valued at $420
million as it looks to boost its U.S. manufacturing capacity
and market share for fitness products.
from people largely working from home.
Severa l of the components that go into the
manufacturing of Peloton's products are sourced
internationally, including from China, according to the
company's regulatory filing in September.
Precor, a provider of treadmills, stationary bikes and
workout accessories, is a unit of Finnish sports
equipment maker Amer Sports, which is owned by an
investor consortium that includes Anta Sports and
Tencent Holdings Ltd.
The acquisition adds 625,000 square feet of U.S.
manufacturing capacity for Peloton with in-house tooling
and fabrication, product development, and quality
assurance capabilities in North Carolina and Washington.
The company would be able to deliver products to its
customers sooner on the back of the addition.
Peloton's biggest-ever deal, which is expected to close
early next year, would also add more commercial
establishments to its consumer base as Precor counts
hotels, colleges and corporate campuses as its
customers, Peloton said.
However, the surge in demand forced Peloton Chief
Executive John Foley to say last month that wait time for
certain products had been “unacceptably long.”
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Since taking office in April, Chief Executive Officer Arvind
Krishna has acquired at least five startups from the
hybrid cloud space. Krishna was the principal architect
behind IBM's $34 billion Red Hat deal last year.
IBM President Jim Whitehurst, in an interview with
Reuters, said the company was unlikely to do a major
acquisition in the cloud sector in near future.
The world's first big computing firm has set its sights on
the so-called hybrid cloud, where it sees a $1 trillion
market opportunity as more companies use a
combination of their own data centers and leased
computing resources to manage and process data.
“I don't see some big $10 billion acquisition that we need
to do,” Whitehurst said.
Italian confectionerymajor Ferrero toacquire Eat Natural
www.mergersindia.com www.mnacritique.com 35
Italy-based global confectionery major Ferrero Group
has announced that it will acquire Eat Natural, the maker
of high-quality cereal bars, toasted muesli and granola.
The value of the deal has not been disclosed.
On December 17, Ferrero Group announced that it will
The deal is expected to close in the coming months, said a
joint statement adding that the transaction is subject to
customary closing conditions and regulatory approvals.
As part of the transaction, Ferrero Group will take over
Eat Natural's production facilities in Halstead, UK, and
plans to retain the management and the employees of
the businesses.
It is the producer of many iconic brands including Nutella,
Ferrero Rocher, Tic Tac, Kinder and Raffaello, which are
sold in over 170 countries.
Eat Natural employs over 300 people making both fruit &
nut bars and cereals in their 'Makery' in Halstead, Essex.
Eat Natural is a leading brand in the UK, where it is
available in all major supermarkets, health stores, corner
shops and petrol stations.
"Eat Natural are an excellent strategic fit for the Ferrero
Group as we continue to expand our overall footprint and
product offerings into the healthier snacking market
segment," Ferrero Group Executive Chairman Giovanni
Ferrero said.
enter into a definitive agreement to acquire Eat Natural.
Eat Natural Co-founder, Praveen Vijh said, "Ferrero is a
fabulous company and we are proud that they would like
us to be part of their family. We have many shared ethics,
and both have the vision to make healthier snacking
available for everyone."
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PGPL is the largest speciality glass packaging company
in Asia and caters to three key industr ies -
pharmaceuticals, cosmetics and perfumery and food and
beverages. When it goes through, the transaction will
mark another disinvestment by the Piramal group, which
is looking to firm up the capital base of its real estate,
pharmaceutical and financial services businesses
through stake sales in non-core businesses.
The transaction will involve the acquisition of PGPL along
with certain shareholding in its subsidiaries including
Ansa Deco, Kosamba Glass, Piramal Glass UK, Piramal
Glass Europe, Piramal Glass Ceylon and Piramal Glass –
USA. Beyond these, the PE group will also acquire certain
shareholding in Vivid Glass Trading and the filming
division of Ansapack Pvt Ltd, as per the filing.
Private equity (PE) group, Blackstone, has notified the
Competition Commission of India (CCI) of its proposed
acquisition of Piramal Glass Pvt Ltd (PGPL) and its
subsidiaries, on Monday.
Vivid Trading is a company incorporated and registered
in the Dubai Airport Free Zone Authority, engaged in
glass bottle trading and counts PGPL as its supplier while
Ansapack is an Indian firm engaged in the manufacture
and sale of packaging material, including corrugated
boxes and plastic films.
The global PE firm had submitted a binding offer in
October, valuing the Ajay Piramal-owned glass
manufacturing and sales business at about Rs 6,200
crore. Blackstone will undertake the transaction through
PGP Glass Pvt Ltd, a firm set up for the purpose of the
acquisition and affiliated to BCP Topco Pvt Ltd, which is, in
turn, an affiliate of funds managed by the affiliates of
Blackstone, the filing said.
According to the notice filed with the CCI, the relevant
markets have been defined as the market for
manufacture and sale of packaging in India and the
market for manufacture and sale of glass packaging in
India.
Blackstone notifiesCCI of its proposedacquisition ofPiramal Glass
Apax Partners buys 3iInfotech's soware productbusiness for Rs 1,000 cr
According to reports, 3i Infotech's soware product
business used to generate $60 million in annual revenue.
Aer carving out the business and selling it off, 3i Infotech
would continue to focus on its services business.
“Today's announcement is transformative and value
accretive for all stakeholders of 3i Infotech,” said
Padmanabhan Iyer, Managing Director & Global CEO, 3i
Infotech. “I foresee a very exciting future for both the IT
services and the soware products business. Both
businesses will have the resources to capitalise on
IT services firm 3i Infotech on Monday said that the
company's soware product business has been
acquired by private equity firm Apax Partner for a
consideration of about Rs 1,000 crore. The deal values
the soware business higher than the market
capitalisation of the entire company (3i Infotech) which
stands at around Rs 908 crore.
According to the joint statement issued by 3i Infotech
and Apax partner, the soware products business will be
acquired by a newly formed company named Azentio
Soware, wholly-owned by the Apax Funds. The
transaction, subject to shareholder approval and
relevant regulatory approvals, is expected to close in
early 2021.
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market opportunities and build long term value for
employees, customers and shareholders.”
Shashank Singh, Partner and Head of the India office at
Apax Partners, said, “Increasing technology spend on
core soware systems across the BFSI industry and ERP
space is driving rapid growth in the enterprise soware
market in the region. The newly formed company,
Azentio, has a strong portfolio of feature-rich products
that run the core operations for customers. We are
excited to unlock Azentio's potential and help transform
the business into a true regional leader in the soware
space.”
The soware business focusses on core BFSI with clients
in Middle East, South East Asia and India growing at a 6-
8% CAGR. It has a core insurance platform called Premia, a
core lending platform for banks and NBFCs called Castle,
an anti-money laundering application called AM Lock, a
core fund management application called M-Fund and
ERP soware application called Orion among others.
“The Acquirer has entered into a Share Purchase
Agreement (“SPA") with the IDBI Trusteeship Services
Limited acting as a seller (in its capacity as the debenture
trustee for the benefit of Credit Suisse AG, Singapore
Branch) (“seller"), on December 24, 2020, pursuant to
which the Acquirer has agreed to acquire an aggregate
of 10,49,39,361 equity shares representing 33.12% of the
Expanded Voting Share Capital of the Target Company,"
the company said in a stock exchange filing.
The promoters will have to spend Rs363.6 crore for the
open offer to acquire the entire 26% stake.
Prime Focus is an integrated media services company
that provides end-to-end creative services (stereo 3D
conversion and animation), technology products and
services (Media ERP Suite and Cloud-enabled media
services), production services (equipment rental) and
post-production services (Digital Intermediate and
picture post) to the media and entertainment industry.
apiece.
These shares that are being acquired by the promoters
from Credit Suisse were previously held by Anil Ambani's
Reliance Mediaworks Financial Services Pvt Ltd. The
shares were pledged to Credit Suisse.
“The aforesaid Equity Shares are held by the Seller post
invocation of a pledge which was created by Reliance
Mediaworks Financial Services Private Limited. The Seller
also holds a pledge (created by Reliance Mediaworks
Financial Services Private Limited) over 31,639,695 Equity
Shares, representing 9.99% of the Expanded Voting
Share Capital. Such 31,639,695 Equity Shares form part of
the Sale Shares proposed to be sold by the Seller to the
Acquirer, under the SPA, and as per the terms of the SPA,
the Seller shall exercise its rights as a pledgee to enable
the sale of such Equity Shares to the Acquirer," the stock
exchange filing said.
www.mergersindia.com www.mnacritique.com 37
Prime Focus promoterto acquire 33% stake incompany from CreditSuisse for Rs. 463 crore
The promoter group of Prime Focus Ltd on Thursday
said that they have entered into an agreement with
Credit Suisse to acquire a 33.12% stake in the company at
a price of Rs44.15 per share aggregating to Rs463 crore.
This transaction will in turn trigger an open offer by the
promoters to acquire another 26% stake in the company
from public shareholders at the same price of Rs44.15
INTERNATIONAL NEWSCROSS BORDER NEWS
M&A
DigestTHE WHYS and THE HOWSwww.mnacritique.com
Liberty Group buysSBQ Steels in itssecond bankruptcyacquisition
The UK based Liberty group has acquired the
bankrupt 0.25 million tonnes SBQ Steels, culmulating a
three year process in which the company was put into
liquidation aer inital efforts to sell it failed.
Liberty paid Rs 262.45 crore plus interest of Rs 8 crore to
take the Nellore based steel company, its second
acquisition through the bankrutpcy process aer
acquiring the bankrupt Adhunik Metaliks and its
associate Zion Steel in February 2020 under the
insolvency law in a Rs 425 crore cash deal.
"Liberty outbid Switzerland based IMR Mettalurgical
Resoruces to emerge the highest bidder during
liquidation with a Rs 262 crore offer in August. However
the company could not pay in three months stipulated.
Earlier this month NCLT directed Liberty to make the
payment in two days which was done last week," said RK
Bansal, CEO Edelweiss ARC which owns 82% of the debt.
SBQ's acquisition was less than the inital liquidition value
of Rs 472 crore and a whopping 94% haircut to the Rs
4300 crore principle and interest due to financial
creditors led by Edelweiss Asset Reconstruction Co,
Union Bank of India and Bank of Baroda.
Liberty and IMR were among the bidders for SBQ in the
initial bids in 2018 but both did not make the cut with
lenders. Aer a buyer could not be found, resolution
professional Ashish Arjunkumar Rathi put the company
into liquidation.
38 Vol. XXIX Issue No. 10 January 2021
"The company had to go through three rounds of
liquidation before finding a buyer. As a result the reserve
price fell to as low as Rs 218 crore because of lack of
buyers even during liquidation. IMR has agreed to pay Rs
200 crore in January this year but reduced the price to Rs
190 crore citing Covid exigencies. Since it was below the
maximum discount that can be given in these cases the
liquidator called for fresh bids putting Liberty and IMR
head to head in an e-auction which resulted in a higher
price," said a person closely involved in the process.
The UK-based Liberty Steel Group has total rolling
capacity of 18 million tonnes across UK, US and India. The
late revival in interest by both IMR and Liberty came due
to the upturn in the Indian steel market on the back of
higher global demand. Indian steel mills have hiked prices
continuously since September amid improved domestic
demand in line with the 70% increase international prices
since September, on the back of China revival.
SBQ Steels owned by the Chennai based RKKR Group,
manufactures pig iron, sponge iron, steel billets, bars, and
wire rods, catering to the requirements of automobile
and engineering sectors, and also to the nuclear power
industry. However, it has no direct iron ore linkage.
Despite the lower realisation this is a closure of a legacy
NPA for bankers of a plant that was defunct since
November 2017. For Liberty this acquisition gives a
foothold into the Southern market but only aer
investments in plant and machinery to get the company
up and running. Liberty did not reply to an email seeking
comment.
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