Merger and Acquisition

1. Assignment
on
Merger &Acquisition
Submitted By
Sudheer Parashar
MBA 4th Semester
Submitted To
Mr. Gorav Bagra
ABS
Submitted
1

2. BANK OF RAJASTHAN TO
MERGE WITH ICICI BANK
1
ICICI and BOR 2

3. Corporate Profile
Key Rationale ICICI BOR
Type Private Sector Private Sector
Industry
Banking Financial Services Banking Loan, Capital Market and
Allied Industries
Year of Incorporation 1994 1943
Branch 2530 463
Products
 Finance and insurance
 Retail Banking
 Commercial Banking
 Mortgages
 Credit Cards
 Private Banking
 Asset Management
 Investment Banking
 Corporate or wholesale banking,
 Personal banking ,
 Commercial banking,
 Retail banking,
 Finance and insurance,
 Investment Banking,
 Auxiliary services,
 Merchant banking,
Trust and custodial
services
ICICI and BOR 3

4. Financial Profile (At March 31, 2010)
Key Rationale ICICI BOR
Total Income
32999.36 1496.67
PAT
4.024.98 102.13
Total Assets
363,399.71 17300.06
CAR(Min. 8%)
19.14% 7.74%
Net NPA Ratio
2.12 1.6
Total Deposit
2,020.17 billion 1506.35
Borrowing
942.64 billion 0.65
ICICI and BOR 4

5. Merger
ICICI bank approved merging of Bank of Rajasthan with itself on
18 May 2010. The share swap ratio was announced at 25:118 (25
shares of ICICI Bank for 118 shares of BOR). The Reserve Bank
of India on 13th August 2010 gave its nod to the merger.
ICICI and BOR 5

6. Deal Structure
Company Swap
Ratio
Out.
Share(Crore)
Price Before
Announceme
nt
Market
Cap
Deal
Value
(Crore)
ICICI 25 111 889.35 99221 3042
BOR 118 16 99.5 1597
ICICI and BOR 6

7. Reason beyond Merger
Marketing
 Customer centric strategy
 New- found branch - focused strategy
 Improve presence in north India
 It will also give us the ability to grow CASA and push
inclusive banking
ICICI and BOR 7

8. Continue…. Reason beyond Merger
Operational
Increase Base of Customer
Increase in retail deposit base. Consequently,
ICICI Bank would get sustainable competitive advantage over
its competitors in Indian Banking
ICICI and BOR 8

9. Financial
valuation= Rs. 3041/ 463 branches (Rs. 6.6 crore at an
average rate)
Continue…. Reason beyond Merger
ICICI and BOR 9

10. StrategicApproach
Although valuation in monetary terms does have a strong
impact in any merger but without consideration of about 30
lakh customers and approx. 4000 employees, the deal might
turned to a big failure.
ICICI and BOR 10

11. Conclusion
 ICICI Bank’s branch network, already the largest among
Indian private sector banks, and especially strengthen its
presence in northern and western India.
It would combine Bank of Rajasthan’s branch franchise with
ICICI Bank’s strong capital base, to enhance the ability of the
merged entity to capitalize on the growth opportunities in the
Indian economy.
This is the third acquisition by ICICI Bank. It had earlier
acquired Bank of Madura way back in 2001 and the
Maharashtra-based Sangli Bank in 2007 which shows that
ICICI Bank believe in the expansion by the strategic move
through amalgamation
ICICI and BOR 11

12. Bharti Airtel completed a deal to buy
Kuwait-based Zain Telecom's African
business for $10.7 billion
2
Bharti Airtel and Zain 12

13. Corporate Profile
Bharti Airtel:
Bharti Airtel is the largest wireless service provider in our country and
the 5th largest integrated telecom operator in the world. It has presence
in all the 22 telecom circles in India and operations in
Srilanka, Bangladesh and Africa. The company provides its wireless
services under the GSM (Global System for Mobile Communication)
technology
Zain Africa
Wholly owned subsidiary of Zain, incorporated in Netherlands and held the
African operations of Zain.
The company was originally named Celtel which was acquired by Zain in
2005 and renamed as Zain
International BV. The same has been acquired by Bharti Airtel now through
Bharti Airtel Netherlands BV
Bharti Airtel and Zain 13

14. Financial Profile
Basis Bharti Airtel Zain Combined
Revenue
$ Billion 8.03 3.64 11.67
Rs. 36961.6 16744 53705.6
Net Profit/Loss
$ Billion 1.84 -0.1 1.74
Rs. 8469.9 -310.6 8159.3
EBITDA
$ Billion 3.3 1.2 4.5
Rs. 15167.8 5520 20687.8
EBITDA Margins % 40 32
Bharti Airtel and Zain 14

15. Deal Structure
Acquirer Bharti Airtel Limited
Seller Mobile Telecommunications Company KSC
Target Zain Africa International BV
Acquisition
Bharti Airtel Limited indirectly acquired
100% of Zain Africa
International BV and its business operations
in Africa from Zain
under a privately negotiated agreement
Mode of Acquisition Security (Share) Sale
Consideration USD 10.7 billion
Bharti Airtel and Zain 15

16. Financial Decision
In Feb 2010, Bharti paid $10.7 billion for Zain Africa, which is 10
times EV to EBITDA multiple for Zain.
Bharti was valued at 7.2 times EV to EBITDA.
Zain Africa has made a net loss of $112 million in the nine months
to September 2009.
The deal is highly volatile and carries huge commercial risk.
Bharti structured the deal as LBO with loan worth $8.3 billion with
LIBOR plus 195 basis points.
With extremely high cost of acquisition, interest payable on loans
availed and meager revenues for next few years.
Bharti Airtel and Zain 16
Financially does not make any Sense

17. Earning dilution for Bharti in FY12E
($ Million) Bharti Zain Consolidated
Revenues 10956 4007 14963
EBITDA 4135 1402 5537
EBITDA Margin % 37.7% 35% 37%
Interest 9 749 758
Dep 1511 900 2411
PBT 2615 -247 2368
Tax 418 418
Minority Interest 55 -74 -19
Tax Shield on Interest 15% -112 -112
PAT 2141 -60 2081
% reduction in PAT -2.8
Bharti Airtel and Zain 17

18. Key Driver of Deal
 Saturation in India telecom market
 Over dependence on India market
 Low tariff and high volume model in Africian
Bharti Airtel and Zain 18

19. Reason Beyond Merger
Africa is attractive for Bharti as the mobile user base is
low there, with just over a third of the population having a
mobile.
Telecom Zain's 15 African operations included in the deal have
a combined user base of about 42 million.
Indian market is also showing early signs of saturation, with
penetration reaching about 45 percent.
Bharti Airtel and Zain 19

20. Strategy
Bharti gains access to at least three African countries where
Zain enjoys a clear hegemony
Two-thirds of the mobile market in Niger, Malawi and Chad
(operating margins in excess of 40%).
Moreover, despite its poor financial performance in Africa,
Zain’s average revenue per user (ARPU) of $8.2 is much better
than Bharti’s $5. This means, Bharti may be able to rake
in profits from these markets if it controls costs effectively.
Bharti Airtel and Zain 20

21. Conclusion
It is a structural shift on the telecom space because the growth rates
are topping out and over the last few quarters, the operating profit
margins for most of the players have been under pressure. The
direction which Bharti took was to address that concern to
sustain growth rates over the next few years.
However, valuations that one is paying are little bit on the
higher side. However, Bharti is going to be generating pretty
good amount of cash flows over the next few quarters. Bharti’s
key strategic move gives a strong presence in the high
potential African telecom market. However, we are optimistic
that if Zain starts performing, the deal could reap returns to
Bharti in the long term.
Bharti Airtel and Zain 21

22. Sun Pharma to acquire Daiichi
Sankyo owned by Ranbaxy in deal
worth $3.2billion
3
Sun Pharma and Ranbaxy 22

23. Sun Pharmaceutical Industries Limited
 SPIL is an multinational pharmaceutical company headquartered
in Mumbai, Maharashtra that manufactures and sells
pharmaceutical formulations and active pharmaceutical
ingredients (APIs) primarily in India and the United States.
 The company offers formulations in various therapeutic areas:
ascardiology, psychiatry, neurology, gastroenterology and
diabetology.
 It also provides APIs such as warfarin, carbamazepine, etodolac,
and clorazepate, as well as anticancers, steroids, peptides, sex
hormones, and controlled substances
Sun Pharma and Ranbaxy 23

24. Ranbaxy
Ranbaxy is a member of the Daiichi Sankyo Group. Daiichi
Sankyo is a leading global pharma innovator, headquartered in
Tokyo, Japan
Sun Pharma and Ranbaxy 24

25. Deal Structure
Sun Pharma to acquire Ranbaxy Ranbaxy shareholders to get 0.8 shares of
Sun Pharm a stock for every share of Ranbaxy
Deal size approximately US$ 4 billion; ~ 2.2x LTM sales US$ 250
million of revenue and operating synergies by 3rd year post close
Daiichi Sankyo to become the second largest shareholder in Sun Pharma.
Strategic business relationship to continue with Sun Pharma Voting
Agreements
Daiichi Sankyo to vote in favor of transaction (~63.5% ownership)
Sun Pharma promoters to vote in favor of transaction (~63.7% ownership)
Sun Pharma and Ranbaxy 25

26. Financial Structure
All-stock transaction totalling equity value of USD 3.2 billion.
The transaction is worth over USD 4 billion.
The deal values Ranbaxy shares at Rs 457 apiece, representing an 18 percent
premium to its 30-day volume-weighted average share price on April 4, 2014.
On a pro forma basis, the combined entity’s revenues are estimated at USD 4.2
billion with EBITDA of USD 1.2 billion for the twelve month period ended
December 31, 2013. The transaction value implies a revenue multiple of 2.2 based
on 12 months ended December 31, 2013
On April 11, 2014, Ranbaxy Laboratories closed at Rs 467.90, up Rs 6.25, or 1.35
percent. The 52-week high of the share was Rs 505.00 and the 52-week low was
Rs 253.95. The latest book value of the company is Rs 3.41 per share. At current
value, the price-to-book value of the company was 137.21.
Sun Pharma and Ranbaxy 26

27. Purpose beyond Merger
5th largest global specialty generic pharma company
No. 1 pharma company in India, one of the fastest growing markets
No. 1 Indian pharma company in US market
Over US$ 2 billion in sales
Pipeline of 184 ANDAs including high-value FTFs
No. 1 in generic dermatology, No. 3 in branded
Approaching US$ 1 billion sales in high-growth emerging markets
Expanding presence in Western Europe
Sun Pharma and Ranbaxy 27

28. Reasons
 Both drug makers have been facing quality issues in the lucrative
US market, but the deal between them have created world's fifth-
largest generic drug maker.
Ranbaxy has a significant presence in the Indian pharma market and
in the US where it offers a broad portfolio of ANDAs and first-to-
file opportunities.
In high-growth emerging markets, it provides a strong platform
which is highly complementary to Sun Pharma’s strengths
Sun Pharma and Ranbaxy 28

29. Sun Pharma and Ranbaxy 29

30. Conclusion
The combination of Sun Pharma and Ranbaxy will create the largest
pharmaceutical company in India. Sun expects to realize revenue and
operating synergies of USD 250 million by third year post closing of
the transaction.
The combined entity will have operations in 65 countries, 47
manufacturing facilities across 5 continents, and a significant platform
of specialty and generic products marketed globally, including 629
ANDAs
Daiichi Sankyo, the Japanese owner of India's biggest drug-maker by
sales, will hold a stake of about 9 percent in Sun Pharmaceutical after
the deal.
Sun Pharma and Ranbaxy 30

31. Kingfisher Airlines Merge with
Air Deccan
4
Kingfisher and Air Deccan 31

32. KingfisherAirlines
 Kingfisher Airlines, a premium Full-Service Carrier, is a private
airline based company in Bangalore, India.
Currently, it holds the status of India's largest domestic airline,
providing world-class facilities to its customers. Owned by Vijay
Mallya of United Beverages Group,
Kingfisher Airlines started its operations on May 9, 2005, with a
fleet of 4 brand new Airbus - A320, a flight from Mumbai to Delhi
to start with.
The airline currently operates on domestic as well as international
routes, covering a number of major cities, both in and outside India
Kingfisher and Air Deccan 32

33. Air Deccan
 Air Deccan is India’s first LCC.
 It was founded and operated by Deccan Aviation Ltd. by Captain Gopinath in
2003 with regular scheduled flights from Bangalore to Mangalore and Hubli.
 Deccan was known popularly as the common man's airlines.
 Air Deccan triggered price wars in the Indian Skies which forced other
players to match Air Deccan’s prices.
 The consumers benefited while carriers lost. Air Deccan gained market share
but at the cost of profitability
Kingfisher and Air Deccan 33

34. Merger..
Air Deccan airlines merged with Kingfisher Airlines and decided to
operate as a single entity from April, 2008. Following the merger of
Deccan with Kingfisher, in August 2008, Kingfisher renamed Deccan
as Kingfisher Red. After the merger, the company has a combined fleet
of 71 aircrafts, connects 70 destinations and operates 550 flights in a
day. The combined entity has a market share of 33%.
Kingfisher and Air Deccan 34

35. Reason
 Negotiation power and costs saved in fuel and maintenance
will be the a expect savings of about Rs 300-400 crore (Rs 3-4
billion)
Annually to accrue because of the synergies achieved due to the
merger added benefits.
Expect savings of about Rs 300-400 crore (Rs 3-4 billion)
annually to accrue because of the synergies achieved due to the
merger.
The raison d'etre for demerger of scheduled air services from
Kingfisher Airlines into Deccan Aviation is to preserve the tax
offset.
Kingfisher and Air Deccan 35

36. Objective
Focus more on the international routes
Wider domestic reach.
Low cost carrier
Full-service carrier
Immense synergies as both operate Airbus
Kingfisher and Air Deccan 36

37. Conclusion
As result of deal both the company has a combined fleet of 71 aircrafts,
connects 70 destinations and operates 550 flights in a day.
Kingfisher would operate as a single largest (private) airline in the sub-
continent. Besides, operational synergies (engineering, inventory management
and ground handling services, maintenance and overhaul), the management and
staff of both the airlines would be integrated
They would be stronger lessors, aircraft manufacturers and will also spend less
on training and employees. Costs would also reduce which is associated with
maintenance of aircraft.
The savings in cost would be lower by about 4-5% (Rs 300 crores) devising a
more optimal routing strategy it could help in rationalizing the fare..
Kingfisher and Air Deccan 37

38. Verizon wins approval for $130
billion takeover of Vodafone's
share of its wireless network
5
Verizon and Vodafone 38

39. Verizon
Verizon Wireless is the largest U.S. wireless company, with
100.1 million retail connections as of the end of the second
quarter of 2013.
It operates the country’s largest 4G LTE (advanced wireless
broadband) network, which, as of July 2013, was available
to 301 million people in 500 markets across the U.S. As of
the end of the second quarter of 2013,
The company had 73,400 employees and operated more
than 1,900 retail locations in the U.S
Verizon and Vodafone 39

40. Vodafone
Vodafone Group Plc (Vodafone), is a mobile communications
company. Vodafone Red offers consumers and businesses a
package with mobile data allowances, unlimited calls and
texts, plus cloud and back-up services to secure personal data
In February 2014, Verizon Communications Inc completed the
acquisition of Vodafone Group Plc's 45% indirect interest in
Verizon Wireless. In April 2014, Vodafone Group Plc
acquired100 %of its Indian subsidiary, Vodafone India Limited
(VIL)
Verizon and Vodafone 40

41. Financial:
Vodafone shareholders are due to receive roughly 72 pence in Verizon
shares and 30 pence in cash for each Vodafone share they own.
Verizon will pay Vodafone $58.9 billion in cash. To fund this portion of
the consideration, Verizon has entered into a fully executed $61.0 billion
Bridge Credit Agreement with J.P. Morgan Chase Bank, N.A., Morgan
Stanley Senior Funding, Inc., Bank of America, N.A. and Barclays.
Verizon intends to reduce the commitments under the Bridge Credit
Agreement with the issuance of permanent financing. In addition, Verizon
expects to maintain capital structure, balance sheet and financial policies
consistent with investment-grade credit metrics, in part based on 100
percent access to Verizon Wireless’ cash flow
Verizon and Vodafone 41

42. Reason:
The deal however halves the size of the Vodafone Group to a
company worth around USD100 billion, pushing it down from
the worlds's second largest phone company to the fourth, behind
China Mobile, AT&T and Verizon
Verizon and Vodafone 42

43. Conclusion:
Verizon is paying Vodafone $130 billion to gain full control of
Verizon Wireless, which will help it compete in the U.S. Vodafone
now has the war chest to embark on some serious M&A, but who’s
the target
Acquiring Vodafone's stake in Verizon Wireless provides us with
opportunities for greater financial flexibility, enhanced operational
efficiency and innovations that will benefit customers
This transaction allows both Vodafone and Verizon to execute on
their long-term strategic objectives. Our two companies have had a
long and successful partnership and have grown Verizon Wireless
into a market leader with great momentum
Verizon and Vodafone 43