Mergers and acquisitions of companies

S.R. LUTHRA INSTITUTE OF MANAGEMENTSUBJECT- STRATEGIC MANAGEMENT

CEC MODULE VSem-III / Shift 1

Topic: Merger and Acquisitions of Companies

SUBMITTED BY:

SUBMITTED TO:Ms. Roshni Singh

(Assistant Professor)

Sr no.

Name Enrollment No.

1. Jyoti Dabhi 157500592013

2. Sumit Dalmia 157500592014

3. Dhwani Joshi 157500592016

4. Kumel Rangwala 157500592046

5. Mayur Tomar 157500592052

6. Nilam Mangukiya 157500592058

PfizerFounded: 1849

Founders: Charles Pfizer and Charles F. Erhart (New York)

CEO: Ian Read (UK)

Core competency: Research-based pharmaceutical company

Acquisitions by company: Warner–Lambert (2000), Pharmacia (2002), Wyeth (2009), King Pharmaceuticals (2010)

Allergan Plc.Founded: 2015 (Through Acquisitions of Allergan Inc. by Actavis Plc.)

Founders: Allen Chao, Ph.D. and David Hsia, Ph.D.

CEO: Brenton L. Saunders (US)

Core competency: Eye care, Neurosciences, Medical dermatology, Medical aesthetics, Breast enhancement, Obesity intervention and Urologics.

Reasons for Merger and Related Facts Value Of Deal: $160 billion (2015)

CEO: Ian Read

Pfizer’s Share: 56%

Allergan’s Share: 44%

Reason for Merger: Tax Relief for Combined Entity

Tax: Pfizer (USA) – 39.1% and Allergan (Ireland) – 12.2%

Reasons for Demerger Government Rule of Ireland: 60% shareholding in the combined entity for tax benefit.

Old Treasury Rule: 80% shareholding in foreign company will be charged US taxes

New Treasury Rule: 50% shareholding in foreign company will be charged US taxes (2016)

Fee payment of Pfizer to Allergan: $ 400 million

PixarFounded: 1979 as graphic division of Lucas Film

Founders: Alvy Ray Smith & Edwin Catmull (US)

CEO: Edwin Catmull & Jim Morris (US)

Core competency: Hardware technology and software technology (Imaging)

DisneyFounded: 1923

Founders: Walt and Roy Disney (US)

CEO: Bob Igler (US)

Core competency: Media Networks, Parks and Resorts, Studio Entertainment and

Consumer Products

Reasons for Merger and Related Facts Value Of Deal: $ 6.3 billion (2015)

CEO: Bob Igler

Disney’s Share: 100%

Reason for Merger: To gain more profit as compared to agreements between them

Benefit to Disney: Computer motion pictures

Benefit to Pixar: Other lines of products such as apparels, toys, and so on

Facebook - WhatsApp Acquisition

WhatsAppFounded Feb 24 2009Founder Jan KoumStable Release iOS – Version 2.11.7

Windows – 2.11.356.0Blackberry – 2.11.529Android – 2.11.152

Operating System iOS, Android, Blackberry, Nokia Series 40, Symbian, Windows, Nokia Asha

License Proprietary

FacebookFounded Feb 4 2004

Founder Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, Chris Hughes

Revenue US$7.872 billionOperating income US$2.804 billionNet income US$1.5 billionUsers 1.23 billion (monthly active)

Value of the Deal• WhatsApp is being Acquired for $19 billion

• It includes - USD 4 billion in cash

- USD 12 billion worth of Facebook shares - USD 3 billion in restricted stock units

• Jan Koum to join board of directors of facebook

Why Acquisition• MAU (monthly active users) will ramp up to 1 billion by 2019

• Gives it additional leverage over Twitter in the battle for more direct messaging market share.

• WhatsApp’s function will make it a near-essential add-on to smartphones, and this—combined with smartphone user growth as well as user behaviour that’s shifting more and more towards mobile.

 • This will help Facebook to diversify its revenue sources away from

the U.S.

• WhatsApp to add voice call to its product in second half of this year.

• Two privacy groups filed a complaint with the Federal Trade Commission to

block Facebook's $19 billion acquisition of messaging service WhatsApp.

The groups want Facebook to provide more insight into how it intends to use

data from the app's 450 million users.

Present Status

SONY & ZEE ACQUISITIONAS A LEADING TELEVISION NETWORK IN INDIA, SPN COMPRISES SONY ENTERTAINMENT TELEVISION (SET), ONE

OF INDIA'S LEADING HINDI GENERAL ENTERTAINMENT TELEVISION CHANNELS

•MAX

• MAX 2

• SAB

• PIX

• AXN

• AATH

• MIX

• SIX

• SONY ESPN

• LIV

SONY PICTURES NETWORKS INDIA IS IN ITS 21ST YEAR IN INDIA.

Zee Entertainment Enterprises

India’s leading television media.

More than 3,818 movie titles.

ZEE entertains over 1 billion viewers across 171 countries.

ACQUISITION

On 31 August 2016 deal took place.

385 million US dollar in an all-cash deal.

ZEE Ten’s Sports channel includes;

TEN 1

TEN HD 1

TEN 2

TEN 3

TEN Golf HD

TEN Cricket

TEN Sports

Ten Sports from Dubai-based Abdul Rahman Bukhatir’s

Payment of Rs 500 crore between 2006 & 2011.

Zee secured losses amounting to around Rs 600-640 crore.

Deal Factsheet Non-compete period of 4 years.

All-cash deal. Sony to make payment at one go after closure of deal.

Transaction and tax costs in the range of 5–10%.

Deal likely to close in next 4–5 months.

Require no objection certificates

Deal value does not include proceeds from two ongoing court cases with BCCI.

 ROVER COMPANY

A British car manufacturing company, found in 1878 as Starley & Sutton Co.

First car in 1904 After a string of mergers, nationalisation and takeovers, it

became a part of the British Leyland Motor Corporation in 1968. The group was sold to British Aerospace in 1988 and in 1994, the

control of the group was passed to BMW of Germany.

BMW AG

German automobile, engine and motorcycle manufacturing company

Began as aircraft engine company in 90’s. In 1923, first motorcycles and started car production BMW acquired the Rover Company in 1994 for ₤800mn. After

investing about ₤2bn and getting no synergies, it sold the company in 2000 to Phoenix Consortium for ₤10.

Acquisition

BMW wanted to increase market share and they saw rover . Another major factor in the acquisition was the low level of cost

in the British manufacturing sector compared to the costs in Germany. These costs, which were 60% lesser in Britain, had the ability to substantially reduce BMW costs.

BMW owned Rover from 1994 to 2000 by which time the company was piling up losses at a rate of £2million a day.

Outcomes

cultural differences Poor leadership Poor due diligence The linguistic differences between the two companies BMW’s decision was partly based on the substantial cost

difference between developing the technologies in house and buying it from Rover.

Summary

Kraft Foods sealed a deal for Cadbury as the famed British chocolate maker accepted a sweetened bid worth some US$19 billion creating a world leader in confections. Ending a bruising months-long hostile takeover battle, Cadbury's board agreed to an improved offer valuing the British group at 11.5 billion pounds (US$18.9 billion), or 840 pence per share, the companies said in a statement. Under the agreement, Cadbury shareholders will also receive 10 pence per share via a special dividend, lifting Kraft's offer to 11.9 billion pounds (US$19.5 billion). The deal would make US-based Kraft, the world's second-biggest food company, one of the biggest global players in chocolate and confections, giving the

US group the brands of Dairy Milk and Creme Egg to go along with Kraft's Toblerone, Milka, Suchard and Cote d'Or, among others. Investors welcomed Tuesday's news, sending Cadbury's US-listed shares up 6.14 per cent to US$55.09. Kraft shares fell 0.57 per cent to US$29.41

KRAFT STRATEGIES

Kraft foods offered a cash cum stock deal to make it lucrative to the shareholders and also it announced a 10 pence bonus dividend to shareholders to lure them to accept the deal.

After the initial rejections by Cadbury Management, Kraft made its proposals directly to Cadbury's shareholders over the heads of its board.

This was done to maintain competition in the market. It sweetened the deal by offering more cash and reducing the shares offered.

CADBURY’S DEFENSIVE STRATEGIES

Cadbury moved the UK Takeover panel to pressurize Kraft.Cadbury discussed a rival offer with Pennysylvian Company . Cadbury was successful in boosting its 3rd Quarter results which made the company more valuable.

This forced Kraft to negotiate instead of just rolling out an offer. A big part of Cadbury’s defence strategy rested on limiting the impact of hedge funds in determining the deal.

There is a lot of cultural changes in both the companies so it is difficult for the companies to cope up with these changes. Both companies have participative and helping in nature..

PLANS AFTER TAKEOVER

The higher long-term growth rates in revenues and bottom lines will be driven by revenue synergies Cadbury is highly complementary to Kraft’s geographical footprint and will increase developing markets’ contribution to Kraft’s net revenue from about 20% to about 25%. In recent years Kraft ran a large project to implement the SAP ERP 6.0 system, which SAP billed as one of its largest global ERP implementations