By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

1. Domestic: ICICI Banks acquisition of Bank of Rajasthan- 2010 Acquirers Motives- ICICI Will get 460+ branches and 111 ATMS immediately. Targets Motive- Bank of Rajasthan Promoter will get an exit route: Indias capital markets regulator in March banned BoR promoter Tayal and about 100 companies and people associated with his family from trading in securities for improper disclosure about their holdings in the bank. According to the Securities and Exchange Board of India, the Tayal family owned 55.01% of the bank in December, even though Tayal claimed his group stake was 28.06%. Overcome regulatory hassles: BoR has also been under the scanner of the Reserve Bank of India (RBI) for alleged violation of banking regulations, including those on corporate governance. G. Padmanabhan, BoR managing director and chief executive officer, was appointed by RBI in November for two years with a mandate to improve corporate governance practices at the bank. ICICI Brand: BoR could leverage on ICICI Brand and improve its corporate image that had taken a beating due to regulatory hassles.

Greater presence in western parts of the country like Rajasthan

Inclusive Banking: Bank will be able to bring those people under banking services who are in the remote areas. Greater ability to grow CASA.

Shareholders of the troubled Bank of Rajasthan Ltd (BoR) got 25 shares of ICICI Bank Ltd for 118 shares of BoR in the ratio of 4.72:1, after the boards of the two banks decided to go ahead with a merger. BoR promoter Pravin Kumar Tayal termed the proposed merger as a win-win situation for all the banks, their employees and investors. BoR stock rose 19.95% on the Bombay Stock Exchange to close at Rs99.50, its year high. ICICI Bank stock was down 1.45% to Rs889.35. Most banking analysts said the currently proposed swap ratio is highly favourable to Bank of Rajasthan shareholders. A back-of-the-envelope calculation by analysts values the deal at more than Rs3,000 crore and per branch acquisition cost at Rs7 crore for ICICI Bank, almost equivalent to ICICIs per branch opening cost. This was ICICI Banks third acquisition after Bank of Madura in 2000-01 and Sangli Bank in 200607. The first acquisition helped ICICI Bank step up its presence in the south and the second in the west. The BoR acquisition will strengthen its network in northern as well as western India.

By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

BoR had a network of 463 branches and 111 ATMs. About 60% of its branches are in Rajasthan. ICICI Bank, Indias largest private sector lender, had a network of 2,009 branches and 5,219 ATMs. ICICI Bank had an asset base of Rs3.63 trillion and posted a net profit of Rs4,025 crore in 2010. BoRs asset base was Rs17,224 crore and in first nine months of fiscal 2010, its net loss was Rs9.82 crore. It posted a net loss of Rs44.70 crore for the December quarter and has not announced March quarter earnings. BoRs net non-performing assets as a percentage of total loans in December was 1.05%. The comparable figure for ICICI Bank for the year-end is 1.55%. 2. Domestic: HDFC Bank acquisition of Centurion Bank of Punjab- 2008

Aquirers Motive: HDFC Bank Increase in scale of operations: Scale up substantially in terms of assets to become second only to ICICI Bank in private sector. Greater presence in Punjab, Haryana and Kerala. Fight competition from domestic like ICICI and foreign players intending to enter Indian market on account of RBIs liberal policy. Become market leader in private sector in terms of number of branches.

Targets Motive: Centurion Bank of Punjab Increase in scale of operations: Greater presence in Punjab, Haryana and Kerala. Centurion Bank of Punjab had used merger and acquisitions route in the past (Lord Krishna Bank) for quick growth in scale of operations. Better low cost deposit ratio: HDFC Bank has low cost deposit ratio as 50% whereas Centurion Bank has 25% Improvement of current financials : HDFC Bank, which is known for its clean balance sheet, will have to take over Rs 255 crore of centurion's Net bad loans, which could take the Net NPA ratio of the combined entity to .5% of total advances from the current 0.4% for HDFC Bank.

Greater headroom for capital market lending. Step up its retail and SME assets as Centurion Bank had greater focus on SME and retail assets. HDFC Bank wanted to acquire Centurion Bank as well as wanted HDFC to merge with it. But the later part did not materialise.

HDFC Bank will took over Centurion Bank of Punjab (CBoP) in an all-stock deal. The share-swap deal, worth over Rs 10,000 crore, worked around the current market price of Rs 57 a share of CBoP. In the pecking order, the merged entity was still way below India's biggest private sector bank ICICI in terms of assets, but it was be significantly bigger than Axis Bank. Centurion Bank was exploring a merger and HDFC Bank was one of institutions it was in talks with. This is the second time after almost six years that these two banks are discussing a merger.

By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

While last time it fell through on valuation reasons, what has worked this time is the personal equation between the top brass of the two banks. HDFC Bank MD Aditya Puri, CBoP chief executive Shailendra Bhandari and CBoP chairman Rana Talwar are all ex-Citigroup bankers. Mr Bhandari was also a part of the core team that set up HDFC Bank in '94. Interestingly, Citigroup is also the single biggest shareholder in HDFC - the mortgage giant and parent of HDFC Bank. The CBoP scrip surged 14.4% to Rs 57.05 after a business news channel reported the "merger buzz" while HDFC Bank scrip rose marginally to close at Rs 1,542.90. Interestingly, the HDFC scrip slipped 3.75% to close at Rs 2,648.55. HDFC Bank has 754 branches and has received RBI permission for another 250. The addition of 394 branches of CBoP will help the bank overtake ICICI Bank in terms of branch presence. In the North, CBoP has 170 branches while HDFC Bank has around 250 while in the South, CBoP has 140 branches and HDFC Bank has 150. 3. Domestic: Reliance Industries taking over Reliance Petroleum Limited (RPL)- 2009 Targets Motives: RPL Exit Route for Chevron: RIL, which owns 70 per cent of RPL, will buy Chevron Corps 5 per cent stake in RPL for Rs 1,350 crore as part of the merger. Chevron was supposed to sign crude supply and product off-take agreement with RIL. But it did not happen as they wanted to exit from the investment in refining.

Acquirers Motives: RIL Scale up operations: The merger would result in RIL operating two of the worlds largest, most complex refineries; emerging as the worlds fifth largest producer of polypropylene; and becoming the worlds largest producer of ultra clean fuels at a single location. In the list of world's largest refining companies, RIL will become the 17th largest firm after the merger. Improve operations at times of unfavourable business environment: The merger would help source crude oil for the integrated refinery complex and aid marketing of fuels such as gasoline and diesel globally at a time when demand was slumping RIL will have access to an additional 30 per cent of cash flow generation from RPL that it did not currently have, for a small cash consideration. Become Market Leader: RILs 33 million tonne per annum (mtpa) refinery at Jamnagar together with RPL's newly built 29 mtpa export oriented refinery would make it the largest refining company in India. It would displace state-owned Indian Oil Corporation (IOC) with 50.7 mtpa refining capacity.

Diversification: RPL transforms into a diversified business with less cyclicality

By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

The boards of Reliance Industries (RIL) and Reliance Petroleum (RPL) approved the merger of the two firms, with a swap ratio of one RIL share for 16 RPL shares. While the merger was effective April 1, 2008. Brokers said the swap ratio was positive for RPL shareholders, but somewhat disappointing to RIL shareholders. The RIL stock price, which fell 3.1% to close at Rs 1,225.15. RPL shares fared only slightly better, shedding 1.4% to close at Rs 75.15. According to ETIG estimates, the merged entity was likely to report a cash profit of Rs 29,197 crore in FY10, compared to an estimated Rs 20,757 crore RIL. Under the merger terms, RIL issued 6.92 crore new shares to RPL shareholders, resulting in a 4.4% rise in its (RIL's) equity base to 1,643 crore shares. Global refining major Chevron, which held 5% in RPL, has decided to sell its stake to RIL. Post-merger, RIL's holding in RPL was cancelled, and the promoter group's holding in RIL fell to 47% from 49%. The merger had been executed over a short time-frame, less than a fortnight. Banking sources said that the investment banks and accounting firms involved in the process were contacted around 10 days ago. The decision to go ahead with the merger had accelerated after US oil giant Chevron decided not to hike its 5% stake in RPL to 29%. This happened after RPL and Chevron failed to sign a product-offtake agreement which had envisaged the US oil major buying 45% of RPL's products. "This merger follows RIL's philosophy of creating enduring value for all shareholders," Mukesh Ambani, chairman of both RIL and RPL, was quoted as saying in a media release, adding, "It is a significant step in our goal to be among the largest global corporations." RIL could boast of the world's largest refining capacity at a single location, with a capacity to process 1.24 million barrels per day (mbpd). Company officials said that RIL had almost onefourth of the world's complex refining capacity, which refers to the ability to blend crude of varying quality, including those of very low quality. Further RIL, particularly the RPL unit, had the capability to supply petroleum products meeting California environmental standards, believed to be the world's toughest. Further, it had the capability to supply ultra-low sulphur diesel to western markets. Post merger, RIL's capability to process many varieties of crude increased substantially. The merger reduced the earnings volatility for RPL shareholders and allowed them to participate in the full energy value chain of RIL. Analysts opined the merger will provide operational synergies, as RIL already has a refinery, independent of the one it will be getting from RPL. "It (the merger) may not help Reliance much in financial terms because RIL anyway held 71% in RPL. However, it will help in improving cash flows (of RIL)," said an analyst at a domestic brokerage firm. But the company also made it clear that the merger was about operational benefits, and not about tax benefits as projected by most analysts."Integrated energy companies have higher valuations as against the standalone refiners. The merger would unlock synergies in crude sourcing and product placement and lead to greater flexibility in operations planning," RIL's chief financial officer Alok Agarwal said, adding that it would reduce operating costs.

By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

"Since the two firms (RIL and RPL) will continue to function as separate entities as far as their accounts are concerned, the two companies will have their independent tax benefits. This merger is not about tax benefits," he said.

4. Domestic: JSW acquires controlling stake in Ispat Industries- 2010 Acquirers Motives: JSW Targets Motive: Ispat Ind. Cost synergies: Assuage the angry creditors : JSW and Ispat have customers in the same The move was prompted by creditors of Ispat, market and now under the new dispensation who threatened to take over the firm as the Ispat will cater to consumers in South India promoters were strapped for cash. while JSW will cater to Maharashtra. This will cut down on the huge transport costs Given that India is a net importer of steel and it Seeking strategic partner: is very hard to build a greenfield plant in the The promoters couldn't turnaround the country, for JSW, Ispat's manufacturing operations due to financial constraints and presence in western India brings in synergies government policies. So, they were looking and several cost advantages around for a strategic partner. Technology benefit: Improve debt position: Ispat's thin slab casting technology was one of The refinancing can lead to a reduction of the best in the world interest costs in the range of 2-3. Ispat, with JSWs help, can get financial closure in about 12-36 months, which spells a good long-term strategic play. Market leader: JSW Steel Ltd will become the largest steel maker in India as its capacity rises to 14.3 million tonnes (mt) by March 2011 after completing the acquisition of debt-laden Ispat Industries Ltd for Rs. 2,157 crore. JSW Steel Ltd became the largest steel maker in India as its capacity rose to 14.3 million tonnes (mt) by March 2011 after completing the acquisition of debt-laden Ispat Industries Ltd for Rs. 2,157 crore. The money was used to buy 108.66 crore fresh shares, or a 41.29% stake, in the Kolkata-based steel maker, at Rs. 19.85 per share, a 7% discount to Tuesdays closing price of Rs. 21.20. JSWs stock rose 2.23% to close at Rs. 1,212 on the Bombay Stock Exchange. We will finance it (the acquisition) through internal accruals, said Sajjan Jindal, JSWs vicechairman and managing director. JSW also looked for new lenders to refinance Ispats high-cost debt. Ispat total liability is Rs. 9,500 crore, including bank loans, Jindal said. The annual interest burden for Ispat is around Rs. 1,200 crore, an Ispat official said. Ispats rupee debt is high cost and has ballooned. We have time till September to refinance debt to a favourable level by leveraging our credit rating and credibility, Jindal said.

By: Pooja Singla (2011195)

Merger and Acquisition Assignment Submission

Ispat owed Rs. 3,000 crore to IDBI Bank Ltd, Rs. 1,800 crore to ICICI Bank Ltd and around Rs. 1,500 crore to IFCI Ltd. Besides, it also owes Rs. 1,000 crore to a group of banks. Ispat was not merged with JSW, but renamed JSW Ispat Steel Ltd Most analysts regarded the deal positively. Tanuj Rastogi, senior analyst, Marwadi Shares and Finance Ltd, said JSW would have to spend around $1,000 per tonne for a new plant, but this deal means it has added a fully operational facility for around $700 (Rs. 31,710) per tonne. Sunil Jain, vice-president, equity research, at Nirmal Bang Securities Pvt. Ltd, said the deals valuation is good for both the companies, but the challenge for JSW is to make Ispat profitable. The deal was expected to lead to a saving of at least Rs. 2,500 crore per tonne for Ispat. Both companies compete in the same marketwe supply to Maharashtra and they to the South. We have decided that Ispat will move its steel only within a 200km (radius), which will help it cut freight to Rs. 325 per tonne from Rs. 1,400 per tonne, a straight saving of Rs. 1,100 crore per tonne, Jindal said. Also, Ispat can also gain a VAT (value added tax) benefit of Rs. 1,400 per tonne if it sells in Maharashtra. We can help them develop their coking coal and iron ore assets and get them operational. They are buying power at a steep Rs. 5.5-6 per unit. We plan to cut this by supplying power from JSW Energys Ratnagiri unit, he added. Ispat had been facing financial trouble on loan repayments having shut its plant in Dolvi, Maharashtra, on 7 November. The plant restarted operations on Tuesday morning. Vinod Mittal said the company could not run profitably because of issues with material, finance and government policies. On Monday, the deal hit a late hurdle after IDBI Bank threatened to convert Rs. 135 crore of debt into equity immediately. Jindal acknowledged that IDBIs notice delayed the deal. We had a huge argument with lenders because they wanted to convert at Rs. 14, while we are coming in at Rs. 20, but they said they had suffered for the last few years and now want to ride the upside, he said. In a statement, ICICI managing director and chief executive officer, Chanda Kochhar, said: The entry of a large strategic investor into the company will strengthen its balance sheet and enable productive utilization of its capacity. This transaction protects the interests of lenders and enhances value for other stakeholders. They have an initial licence and need money for exploration, which JSW will bring, he said. Kotak was the sole adviser to Ispat. 5. Cross Border (outbound): Tata acquired British Steel Company Corus Group- 2007 Acquirers Motive: Tata Steel Targets Motive: Corus Group Capacity expansion: crude steel capacity to Access to high growth markets: Tata had a 27mtpa strong retail and distribution network in India and SE Asia. This would give the European manufacturer an in-road into the emerging Asian markets. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Hence there would be a powerful combination of high quality developed and low cost high growth markets

By: Pooja Singla (2011195) Leadership: 5th largest steel company in the world

Merger and Acquisition Assignment Submission Low cost raw material sourcing: Tata was one of the lowest cost steel producers in the world and had self-sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look-out for sources of iron ore.

Markets expansion: Enter into new markets. International expansion for Tata Steel. Wider distribution network There would be technology transfer and crossfertilization of R&D capabilities between the two companies that specialized in different areas of the value chain Timeline: On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake in the Anglo-Dutch steel maker Corus at 455 pence per share in an all cash deal, cumulatively valued at GBP 4.3 billion (USD 8.04 billion). On November 19, 2006, the Brazilian steel company CSN launched a counter offer for Corus at 475 pence per share, valuing it at $8.4 billion. On December 11, 2006, Tata preemptively upped the offer to 500 pence, which was within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6 Billion. The Corus board promptly recommended both the revised offers to its shareholders. On December 11, 2006, CSN announced a formal offer for the Company at an offer price of 515 pence per Corus Share , valuing the deal at $ 9.6 Billion.. The CSN Acquisition would also be implemented by way of a scheme of arrangement and is subject to a pre-condition that either Corus Shareholders reject the Tata Scheme or the Tata Scheme is otherwise withdrawn by Corus or lapses. The Corus board promptly recommended both the revised offers to its shareholders. Also on December 19, 2006, UK Watchdog the Panel on Takeovers and Mergers announced that the last date for each of Tata and CSN to announce revised offers for the Company, should they wish to do so, is 30 January 2007. They also warned that it would begin an auction procedure if the two remained in competition. On January 31, 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at $11.3bn

Final deal structure $3.53.8bn infusion from Tata Steel ($2bn as its equity contribution, $1.51.8bn through a bridge loan) $5.6bn through a LBO ($3.05bn through senior term loan, $2.6bn through high yield loan)