Mergers & Acquisitions

Presented by: Group - 4

SuhaibPrathibaPooja SinghNirajRaghuram BhandhariNitin G. Mahendrakar

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M & A –An Overview

* Mergers and Acquisitions M&A have become very popular all over the world in last 3 decades.

* India born Laxmi Nivas Mittal has taken over Arcelor in Europe, to form a largest Steel making Company in Europe-”Arcelor-Mittal.”(130 Mtons/Year-Global) .

* Tata Steel-Corus(UK) Acquisition by Tata Steel for $12 Billion is very significant and a landmark for the Indian Corporate World. (28 Mtons/Annum-2006)

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Types of Mergers

1. Horizontal

2. vertical

3. Conglomerate

4. concentric

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M & A Process

Pre acquisition review

Search and screen targets

Investigate and value the target

Acquire through negotiation

Post merger integration

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Reasons for M & A

• Increased Market Power• Overcome Barriers to Entry• Lower Cost and Risk of New Product

Development• Increased Speed to Market• Reshaping Competitive Scope

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Advantages of M & A

• Drives growth• Enhance profitability• Mitigates risk• Cut down competiton• Reduces tax liability

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Example of Merger

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EXAMPLE OF MERGER

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ABOUT BOR AND MERGER

• ICICI OFFERED TO BOR

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WHY MERGER OF BOR WITH ICICI ???

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ICICI AFTER MERGER

• PE RATIO 22.97 10/06/10• EPS(RS)36.10 MAR 2010• SALES(RS crore)5826.98 MAR 2010• FACE VALUE RS 10• NET PROFITMARGIN(%)9074 MAR 2009• ROAE (%)7.58 MAR2009

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Acquisition

An acquisition may be defined as an act of acquiring effective control by one company over the assets or management of another company without any combination of companies

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Legal procedure

*Sec 391 – 394 of Indian companies act covers M & A.*Examination of object clause*Approval from the board*Intimation to share holders and creditors. *Approval from share holders and creditors.- 75% of SH and

creditors to approval*Application to National Company Law Tribunal (NCLT)• Petition to NCLT for approval• Transfer of assets and Liabilities• Issuance of shares

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Example of Acquisition

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TATA acquiring CORUS

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Former Name : Tata Iron and Steel Company

Type : Public BSE (500470)

Founded : 1907

Chairman : Ratan Tata

Industry : Steel

Overview of the Acquirer

Founder : Jamshedji Tata

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Headquarter : Jamshedpur, Jharkhand, India

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Name : Corus

Parent : Tata Steel, member of Tata Group

Type : Subsidiary

Founded : 1999

CEO : Kirby Adams

Industry : Steel

Course : SML730Organisation Management

DMS. IIT Delhi

Overview of the Acquired

Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.

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Headquarter : London, England, UK

Reasons for bid from TATA Group To tap European mature market

Cost of acquisition is lower than setting up green field

plant and marketing and distribution channel

Acquisition would help Tata to feature in top 10 players

in the world of steel industry

Technology benefit

Economies of scale

Corus held a number of patents and R&D facilities

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Reasons for CORUS to accept bid

Saturated market of Europe

Decline in market share and profit

Total debt of Corus was 1.6 Bn GBP

High cost of production, as there was a scarcity of

raw materials

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Counter Bid• Nov 18, 06 : The Brazilian Steel Group CSN

approaches Corus With an offer of 475 pence/share• Nov 27, 06 : Board of Corus decides to give more

time for shareholders to decide whether it issue forward a formal offer

• Dec 18,06 : Tata increases its original bid for Corus 500 pence/share, then CSN made its counter bid at 515 pence/share in cash

• Jan 29, 07 : CSN raised its bid to 603 pence/share• Jan 31, 07 : Tata had agreed to offer Corus investors

608 pence per share in cash• Apr 02, 07 : Tata won over CSN, to acquire Corus

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How the deal was funded.???

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Effect on stock price of CORUS

Corus Stock Price moved upwards as the bids moved upward

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Effect on stock price of TATA

Tata steel stock moved downwards showing some volatility

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Effect on stock price of both TATA and CORUS

From the announcement date till the deal completion, Corus

stock gained 67% and Tata Steel stock lost around 12%

Result of the deal On July 23, 2007, Tata Steel stock reached 721.00

on the Bombay Stock Exchange’s (BSE) stock Sensex after hitting a lowest of 399.00 on March 8, 2007. Tata Steel was one of the market leaders for the BSE Sensex up 27% in 2007.

Currently TATA’s are the 7th largest producer of steel in the world. TATA’s credit ratting moved up from BBB to BB.

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