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and markets overseas. This compe-tency can be extended with the Indiantechnological companies, who till nowhave been serving the needs and re-
quirements of western nations.
TRADE DEVELOPMENT: The Chi-nese language which till now had beenseen as a barrier to the growth of thecountry has been mutually reducedand the trade activity has reached theAustralian and European countries.Added to all, the far developed trans-portation systems in China have addedthe miss outs. India on the other hand,
can use the Chinese channel to importand export activity which constitutesto a large share of Indian GDP, thusgiving a profit to China and an in-creased growth to India.
While the India-targeted M&A deals sofar in 2010 grew by 43 per cent from$1.98 billion in the year-ago period,China targeted volume rose 88 per centto $8.3 billion. BRIC accounts for 10
per cent of global M&A volume in2010. The top five BRIC deals in 2010involve Chinese and Indian targets andaccount for 47 per cent of the totalBRIC volume. This underlines the pro-spective growth that India and Chinacan for see in the coming years.
BRIC nations have now shaken the G8and definitely at the peak of develop-ment and they can mutually benefit
each other by successfully collating re-sources and competencies. The dragoncannot be tamed, yet can be made acompanion without competition!
Sometimes it is sensible to befriend thedragon to pass the terrain, than to huntfor its head!
The Indian Inc. today thrives in a time ofcut throat competition to prove its mettleby betting on higher stakes of companiesabroad. A report published by Dealogicshows that India has emerged as the sec-ond most targeted nation among theBRIC nations, after China. India has al-ready grabbed up merger and acquisi-tions deals worth $2.8 billion so far thisyear alone. China no doubt remains un-der Indian watch keepers eyes for its
remarkable sudden yet steady rise in theglobal market scene. The manufacturingsector which has always remained the predominant success factor for Chinaand its abilities to rake up orders worth billions of dollars for many Europeanand American companies has jet stead itsgraph of growth.
The call of the day is to increase theMergers and Acquisitions between In-
dian and Chinese companies. There are acouple of reasons for that:
LABOUR: Both the economies havesurged because of the ready availabilityof cheap labour and the manufacturingand construction industry can cast asuccessful and a much cost effectivealliance to share project developments.
TECHNICAL ABILITIES: Private Chi-
nese firms include global leaders in sec-tors such as the Internet and green tech-nology. Chinese makers of cars andconsumer goods are looking for brands
India-China: A mutual M&A leadership?
I N S I D E T H I S
I S S U E :
Bank of
Rajasthan to
merge with
3
UltraTech to
buy Star
Cement
4
HP to buy Palm
Incorporation
5
SAP to buy
Sybase
6
Welspun to buy
stake in Aziz
Pipe Co.
7
Indian Aviation
Industry vs
M&A
8
Crossword 9
Quiz 10
SYMBIONT2 8 T H M A Y 2 0 1 0V O L U M E I I
I S S U E 7
By Akash Sablok
(Click on thearticle title)
8/9/2019 Symbiont May 2010
3/12
P A G E 3
Bank of Rajasthan to merge with ICICI Bank
The share prices went haywire with BOR registering a year high of 20%and ICICI falling 1.45%.
By Rahul Agarwal
Date May 18th , 2010
Acquirer ICICI Bank
Acquiree Bank of Rajasthan
Deal size 25 shares for 118 shares of BOR
Type ( Merger/Acquisition) Merger
Purpose To give them a better market presence in thewestern India and give them deposits thathave advanced them by three years
ICICI Bank and Bank of Rajasthanare entering in a non- cash mergerthrough an all-share deal, valued atabout 30.41 billion rupees. This willbe the third time for the ICICI Bankto acquire an old private sector bank.Under the terms of the deal, ICICIBank will offer 25 shares for every118 shares of Bank of Rajasthan.BoRs promoter P K Tayal and his
family will get 16.73 billion rupeesas they owned 55.01 percent of itscapital. Tayal family will ownaround 1.69 percent (20 million
shares) in ICICI Bank, but he will notget a board position.
The productivity of ICICI Bank is
high compared to Bank of Rajasthan.
ICICI recorded a business per branch
of 3 billion rupees compared with 47million rupees of BoR for fiscal
2009, though the assets performance
for ICICI is well below BORs. Since
1997, ICICI Bank has acquired
smaller banks to increase its reach.
Also Sangli Bank in 2007, ITC Clas-
sic Finance and Anagram Finance in
the years 1997 and 1998 respectively.
BoR, one of the oldest private sector banks in the country, plunged into acrisis early this year after ReserveBank of India slapped a Rs 25-lakh(Rs 2.5 million) fine on the bank foralleged violation of various norms.These include irregularities in transac-tions and misrepresentation of docu-ments, norms pertaining to anti-money laundering, Know Your Cus-
tomer and irregularities in the conductof accounts of a corporate group.
The Reserve Bank also appointed
Deloitte to conduct a special audit of
the bank, which recently submitted its
interim report to the Reserve Bank. In
March, Sebi banned 100 entities in-
cluding Tayal Group firms from all
stock market-related activities for
fraudulently hiking the promoter
holding in the bank, while conveying
the impression that they were reduc-
ing their shareholding. Incepted in
1943, BoR has a network of over 463
branches and a customer-base of over
20 lac (2 million).
"When a fellow says it isnt the money but the principle of the thing, it's the money."
Kin Hubbard
TRIVIA
ICICI is the second-
largest bankby reve-
nue,profit and assets
(behind StateBank of
India)and the large
st
privatesector bank in
Indiabymarket
capitalization.
QUOTE-UNQUOTE
BoR promoter PravinKumar Tayal termed the proposed merger as awin-win situation forallthe banks, theiremployees andinvestors.
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P A G E 4
Ultra Tech Cement, an India -basedfirm is planning to acquire Dubai based ETA Star Cement for 380$million which will give Ultra Techdirect access to markets in the MiddleEast and Bangladesh. ETA Stars
manufacturing facilities include a 2.3million tonnes a year clinker plantand 2.1 million tonnes grinding plant,
both in the U.A.E, a 0.4 million- ton-nes grinding plant in Bahrain and 0.5million tonnes grinding plant inBangladesh. It has a market share ofabout 10 percent in Dubai and 20percent in Bahrain.
The transaction is likely to be com- pleted by the June ending quarter.Ultra Tech which is set to becomeIndias biggest cement producer with
49 million tonnes output after it getsregulatory approval to absorb the ce-ment business of a Grasim Industries,wanted to take management controland equity stake of ETA Star. Itsmain rivals in the 270-million-tonnescapacity Indian market, the world'ssecond-largest, are Holcim controlledACC and Ambuja Cements.
The GCC (Gulf Co-operation Coun-
cil) market is expected to grow at 7 percent in future and Ultra Tech hasbeen exporting 2-million tonnes to theregion. The acquisition will help UltraTech to make good profits from thismarket. Earlier, UltraTech posted a26% fall in quarterly profit, laggingmarket forecasts and pushing downits shares as higher input costs and
lower realizations took toll. January-March profit of Ultra Tech slipped toRs228 crore, on net sales of Rs1, 910crore.
About the Firm:Aditya Birla Group, the $24.5 billion(Rs1.08 trillion) diversified Indianconglomerate with interests rangingfrom aluminium to mobile services.
Aditya Birla group company GrasimIndustries said it would consolidateits cement businesses by mergingGrasim cement with UltraTech,which together will have a capacity of49 million tonnes per annum.
Star Cement owns cement plants inDubai, Sudan, Bangladesh and Bah-rain with a total capacity of 3.8million tonnes.
Ultra Tech to buy Star Cement
It gives direct access to markets in the Middle East and Bangladesh
By Tom and Chinnu
Probable Date
June, 2010
Acquirer
Ultra TechCement
Acquiree
Star Cement
Deal size
$380mn
Type
Acquisition
Purpose
To gain directaccess to markets
in the MiddleEast and
Bangladesh
DEAL SYNOPSYS
"While money can't buy happiness, it certainly lets you choose your own form of misery."
Anonymous
The acquisition of ETA Star Cement marks an
entry of the Aditya Birla Group Cement Businessinto the Middle-East. It is in line with our long-
term strategy of expanding our global presenceacross businesses and is consistent with our vi-
sion of taking India to the world, said KumarMangalam Birla, chairman, Aditya Birla Group.
SYMBIONT MAY 2010
8/9/2019 Symbiont May 2010
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P A G E 5
HP to buy Palm Incorporation
To further enhance their smart phone position
By Surajit and Seetha
"It has been said that the love of money is the root of all evil. The want of money is so quite as truly."
Samuel Butler
Date April 28th, 2010Acquirer Hewlett Packard
Acquiree Palm Inc
Deal size $1.2 billion
Type ( Merger/Acquisition) Acquisition
Purpose To enhance HPs ability to participate more
aggressively in the fast-growing, highly profitable
smart phone
Hewlett-Packard Co is all set to buyPalm Inc. at a $1.2 billion deal, of-fering a 23 percent premium to ex- pand into the smart phone market.The deal is expected to enhanceHPs ability to participate more ag-
gressively in the fast-growing,highly profitable smart phone and
connected mobile device markets.
The deal is already approved by theboard of directors of both the com- panies. HP will pay $5.70 cash pershare of Palm, a 23 percent pre-mium to its closing price on the eveof the deal of $4.63. The transactionis expected to close during third fis-cal quarter ending July 31, 2010.Elevation Partners LP (30 percentshare owner), Palms biggest inves-
tor, will get $485 million for its pre-
ferred shares and warrants.
Palm Inc. was the pioneer of highdefinition mobile devices, whichonce dominated the market, buteventually overshadowed by AppleInc's iPhone. Palms last year re-
leases like Pre and Pixi Phone did-nt sell as expected.
On the other hand HP already has asmart phone, the iPaq, which runson Microsoft's Windows mobileplatform. But the device is not ableto stand alone among the fiercecompetition in the market. The gi-ants like i-phone, BlackBerry etc.dominate the market. Now HP,Worlds largest PC maker will look
to lock the horns with those giants
though the combination of theirdeep pocket and Palms established
technology.
Its not sure bet that HP would turn
around Palm and will remain profit-able in the smart phone business.Palms last two releases were not
generating revenue for Palm, andthe competitor for Palms WebOS
platform is already roaring in the
market. Even though Palms We-bOS is a solid mobile operating sys-tem, Googles Android mobile OS
has the potential to challenge it oreven overshadow it, and HPs suc-
cess will depend on how strong theAndroid would be in the future. AnHP-Palm WebOS-based smartphonewould also face Apple's iPhone de-vice.
QUOTE-UNQUOTE
We look forward to
working with HP tocontinue to deliverindustry-leading mo-bile experiences to ourcustomers and busi-ness partners. said
Jon Rubinstein, chair-man and chief execu-tive officer, Palm.
TRIVIA
In 2007, HP's reve-nue was $104 bil-
lion, making HPthe first IT
Company inhistory to report
revenues exceeding$100 billion.
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P A G E 6
SAP AG, the worlds biggest maker
of business-management softwarehas acquired Sybase Inc. in a transac-tion valued at $5.8 billion to help itfend off competition from OracleCorp. The deal makes sense becauseSAP is betting heavily on in-memorycomputing and mobile applications asthe future of computing and Sybase
brings to the table a capability forhigh- speed in-memory databases anda mobile application platform. Oraclein December said it is winning cus-tomers at SAPs expense. SAPs soft-
ware is used for payrolls and cus-tomer relations management.
Another critical reason behind theacquisition is to expand its new op- portunities and benefit from syner-
gies across product lines and markets.The German company said it expectsthe transaction to close during thethird quarter of 2010 and that the dealwill add to its earnings in 2010 and beyond. SAP expects the combina-tion to deliver synergies throughrevenue enhancement and the realiza-tion of cost efficiencies. Sybase sells programs to help access businesssoftware via smart phones and mo-
bile devices which will help SAP usethe technology to allow customersaccess its applications on the move.
Sybase, on the other hand, would getaccess to SAPs in-memory technol-ogy, which would improve process-
ing capabilities. The company wouldalso get access to SAPs event proc-
essing and analytics, which is beingused by the financial sector. As perthe agreement, SAP would pay $65 ashare for Sybase, which is a 44 percent premium to Sybases three-month average price. The transactionwould be funded from SAPs cash onhand and a 2.75 billion loan from
Barclays Capital and Deutsche Bank.The buyout puts SAP into the data-base software market, where its prod-
ucts would compete with rival, Ora-cle.
SAP will continue to support eachorganizations product road map
while enhancing products to help cus-tomers derive additional value fromexisting investments. Both compa-nies development organizations
would remain intact, with the oppor-tunity to collaborate for innovation.
SAP to buy Sybase
To help it fend off competition from Oracle Corp
Date
May 12th, 2010
Acquirer
SAP AG
Acquiree
Sybase Inc
Deal size
$5.8 billion
Type
Acquisition
Purpose
Sybase brings tothe table a capa-bility for high-
speed in-memorydatabases and amobile applica-
tion platform
DEAL SYNOPSYS
"Money is power, & you ought to be reasonably ambitious to have it."
Russell H. Conwell
Bill McDermott, SAPs co-chief execu-tive, said the company would benefithugely from Sybases database and mo-
bile application technology. We see a
great potential in combining the leaderin enterprise software with the leader inmobility, Mr McDermott said.
SYMBIONT MAY 2010
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P A G E 7
Welspun to buy stake in Aziz Pipe Co. for $58
Welspun will now be in a better position to expand its footprint in
the middle east
By Kamnashish and Nirmoy
Welspun Corp will invest $58 millionto buy a majority stake in a Saudipipe firm, a move that could help theIndian steel pipe maker grab a widershare of the Middle East market..Theacquisition of Aziz Pipe, which has acapacity of 270,000 tonnes per an-num, will take Welspuns total capac-
ity to 2.3 million tonnes. WelspunGujarat Stahl Rohren is in the finalstages of negotiations with Saudi
Arabia-based Aziz Pipe company to buy more than 50% stake in AzizPipe for about Rs 260 crore. Thevaluation of the Saudi firm is
around Rs 500 crore.
The company operates a 3.5 lac ton-nes facility in Little Rock, Arkansas,US and hopes to tap the beneficial ofthe Gulf market with the latest move.It also operates a 1.65 MPTA plant in
Anjar, Gujarat, which is being in-creased to 2.1 MTPA now.
With the help of the said acquisition,the production capacity of the com- pany will increase to 2.5 MT, thelargest in the world.
Welspun, formerly known as Wel-spun Gujarat Stahl Rohren, will start
exporting to the middle east regionfrom the Saudi facility beginning Julyafter completing regulatory formali-ties. The Saudi plant is operationaland except for some capital expendi-ture maintenance, Welspun does not plan to invest any money into capac-ity expansion for now.
Welspun, which supplies products totop oil companies such as Royal
Dutch Shell, Exxon Mobil and BPPlc, will now be in a better position toexpand its footprint in the middle east.Eleven of thirteen brokerages have abuy rating on Welspun stock, ac-
cording to Thomson Reuters, as ana-lysts are bullish over the companys
order book and project expansionplans.
Welspun is aggressively expanding
presence in the oil and gas transmis-
sion segment and recently acquired
MSK Projects, allowing Welspun to
lay pipes apart from manufacturing
them. For Welspun, this would be its
second investment overseas. Earlier in
February 2009, it had invested in a
350,000 tonnes facility in the US.
Date April 6th, 2010
Acquirer Welspun
Acquiree Aziz Pipe Co.
Deal size $58 million
Type ( Merger/Acquisition) Acquisition
Purpose To give them more presence in the middle eastmarket
QUOTE-UNQUOTE
It looks like agood
deal... it gives them
morepresence in the
Middle East market.
Having a capacity in
theMiddleEastwillbe
a big advantage
for
them, analyst Niraj
Mansingkaof
Edelweiss Securities
TRIVIA
W e l s p u n w a sawarded the top
Indian company inmetal pipes in theyear 2010 by Dun andBradstreet.
"All progress is based upon a universal innate desire on the part of every organism to live beyond its
income." - Samuel Butler
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Indian Aviation Industry vs M&A
India is a contradiction of sorts. The industry lev-erages its success factors in a year but they arenot sure to sustain for the next financial year too.If the industry is simple and with less competi-tion and varying regulations and other variablefactors, the continuation of profitability can be bet, else a hawk eye on government policies,competitors moves and self-governance holdsthe key to a successful financial and overall or-ganizational performance. The M&A indulgencein the industry, sparks major challenges and op-
portunities, with the only base factor lying to under-stand (a) when to have thedeal, (b) with whom, (c)when will it be profitableand (d) is it required for theindustry profitability in-crease?
The Indian aviation indus-try demarks clearly the
companies sustainable fac-tors and risky terrains. Tillabout May 2005, the entirerush to clinch a share in the booming air traveldemand brought in force some of todays biggest
airlines namely Kingfisher Airlines and SpiceJet. While the former started with redefining lux-ury in the skies, the latter worked on the famedno frills domain. Needless to say, the different
objectives did work out in favour of both.
M&A hit Kingfisher Airlines, when it took overAir Deccan, the then Pied Piper of cash starved but air travel luxury hungry passengers. Thedeal, which then was panned by industry expertssaying that it would dissolve the very niche ofKingfisher, is now the sole factor for the success-ful running of the company. Existing KingfisherFirst and Kingfisher Class flights and routes havebeen brought under the umbrella of Kingfisher
By Puneet Singh
"While money doesn't buy love, it puts you in a great bargaining position."
Sting
P A G E 8
Red, the renamed Air Deccan, which is the in-house no frills class. The deal hampered the
profitability of the company till 2009 which evenforced the company leaders to rethink and overhaul their strategies in order to reconcile with thelosses the company was making.
Though the operational dilemma of the proper plying and fixtures of appropriate classes couldnot be achieved till date in line with the Acquisi-tion terms, yet the company is definitely enjoy-
ing success due to its cor-rect and long term vision-ary policies.
Spice Jet which till datehas been successfullymanaging its fleet usabil-ity and profit factors,along with other low costairlines, been pleading forincreased rates of tickets
at par with the full servicecarriers. And the added popularity of these air-
lines with flyers has given wings to their policiesof breaking the ceiling price which is industry
spoken and till date been their success factor. Forthis reason, it is processing a possible mergerwith Go Air, another upcoming airline, quite popular on the Delhi-Mumbai sector. This hasforced Spice Jet officials to increase collaboratedavailability of seats and share profits. What wasseen as a price war till a few years back, now re-sorts as the profit earning scheme for low costairlines.
Will M&A deals wok as industry favourites orcompetition spoilers, is the call of the playersand their future(5 years and hence) policies andhas definitely been, the risk factors for the Indianaviation industry.
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CRO
SSWOR
D
THEWORDPOWER
ACROSS
3. This firm has agreed to acquire Sterling Com-merce from AT&T for approximately $1.4 bil-lion in cash.(3)
4. The process of determining the current worthof an asset or company.(9)
7. GODREJ has recently acquired this hair carebrand of Latin America.(5)
8. This Accounting, tax and personal financesoftware maker has completed its $91 millionacquisition with Medfusion, which makes prod-ucts that help patients connect with doctors andother health care providers.(6)
9. When a large block of stock is held by an un-friendly company or raider, who then forces thetarget company to repurchase the stock at a sub-stantial premium to destroy any takeover at-
tempt. (9)
DOWN
1. HPs recently-announced acquisition of thiscompany for $1.2 billion which will enable HP tooffer an integrated mobile experience to businessesand consumers worldwide on a variety of devices bycontrolling both the software and hardware forsmartphones, tablets, netbooks, and other form fac-tors. Name the company.(4)
2. This online fun and interactive product maker has
acquired a majority stake in DailyBurn.com, creatorof the wildly popular Daily Burn Food Scanner ap-plication for the iPhone.(9)
5. This firm is all set to acquire Indian firm Piramalfor $3.7 billion. Name the firm.(6)
6. With this tactic the target company stalls with thehope that another, more favourable company willmake a takeover attempt to avoid hostile takeoverby one company. Name the tactic.(7)
7. This bank dealt with a swap ratio of 25 shares for
118 shares with BoR.(5)
P A G E 9
By Ashim, Anish and Shweta
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QU
IZ
1. Which leading IT manufacturing company is buying Sterling Commercefrom ATT for $1.4 bn?
2. Which Indian conglomerate has recently purchased a 55% stake in Reva,as a part of its initiatives to enter the electric car segment?
3. US based Abbott has bought which Indian drug making company, mak-ing it the largest drug maker in India?4. Associated Content has developed a low-cost news model. Name the
company which recently bought it?5. Swiss engineering group ________ bought the US software company
Ventyx for more than $1 billion, bolstering its position in the fast-growing area of renewable energy network management. Name the com-pany.
6. British Airways recently signed a $530 million deal with which com-pany?
7. Star health is getting a staggering Rs. 120 crore investment from which
company?8. Which leading IT company had bought UBS Indias BPO arm?9. _______ Software bought Laser Soft for Rs 52 crore. Name the leading
software delivery company.10. J&J entered in a deal with a European company for its manufacturing
abilities in Europe. Name the company.
Know Thy Words
Mergers and Acquisitions Terminologies
Dawn Raid
Greenmail
This is a process of buying shares of the target company with the expectation that the market prices mayfall till the acquisition is completed.
Greenmail is a situation where the target company purchases back its own shares from the bidding com-pany at a higher price.
Carve
outThis is a case of selling a small portion of the company as an Initial Public Offering.
CATECHIZETHEQUESTION
MARKS
By Richard, Nelson and Deepika
P A G E 1 0
8/9/2019 Symbiont May 2010
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Hostile Takeover
Hostile bids occur when acquisitions take place without the consent of the directors of the target company.This confrontation on the part of the directors of the target company may be short lived and the hostiletakeover may end up being friendly. Most American\n and British companies like the phenomenon of hos-
tile takeovers while there is some more which do not like such unfriendly takeovers.
Management Buy In
Management Buy Out
When a company is purchased and the investors bring in their managers to control the company, it isknown as management buyout.
In a management buy out, the managers of a company purchases it with support from venture capitalists.
Cram-down deal
Colloquial term for a situation where shareholders are forced to accept undesirable terms in a merger orbuyout, such as accepting junk bonds instead of cash or equity. Usually, this is due to a company havingfinancial troubles and needing to merge or be acquired in order to survive.
A takeover technique where the acquiring company offers the target company an amount of money so largethat management of the target company cannot refuse the proposal for fear of shareholder retaliation. If thetarget company was to refuse, the shareholders might file lawsuits or even revolt saying that managementdid not do what was best for the investors. The term is derived from the Godfather trilogy of movies, spe-cifically the famous line "I'll make him an offer he can't refuse."
Godfather offer
ANSWERS
QUIZ
1, IBM2. Mahindra and Mahindra3. Piramal Healthcare4. Yahoo5. ABB6. Iberia7. ICICI Ventures8. Cognizant9. Polaris10. Crucell
CROSSWORD
P A G E 1 1
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INSPIRED BY
Prof. Anirban Ghatak
(Coordinator- Christ University Institute of Management, Kengeri)
ABOUT SYMBIONTSymbionts are organisms which come together for mutual benefit, just like companiesgo for Mergers & Acquisitions.
SYMBIONT is a monthly newsletter dedicated exclusively to Mergers & Acquisitions.
SYMBIONT also has an online forum for related discussions. The newsletter has al-
ways aimed to enlighten the readers about the current happenings in the M&A circuit
along with interesting add ons like crosswords, terminologies, brain teasers and many
more.
Sincere acknowledgment of the efforts of all the contributors for
their knowledge filled articles, crossword and quiz .
P A G E 1 2