[reachmonil]

okies... all clr KM!

now..... could u shed sum light on the tactics!?!? all look like latin n greek! neways... the junta queries out here r never gonna end... (n dats wat we r proud of... the PG cummunity! ) ... so do update us whenever u have time on hand!

chaO!

[Shankx23]

Hey KM,
Kewl stuf from u..hats off!!!U have been a boon to ppl like me who were novices to IB.
Me have a few question on what u said earlier!!!

Originally Posted by kabmilega

In case the Tender Offer is over subscribed (i.e. >20% tender their shares), as was the case in the recent Tender Offer of United Breweries by Scottish and Newcastle Plc, then the tendered shares will be pro rated so as to make sure that only 20% is allowed to be acquired.

.

Can u throw some light on this "tendered shares will be pro rated" Also in ur earlier post u said that Holcim wanted to have foothold on both Gujarat Ambuja and ACC. ACC is obvious but how about Gujarat Ambuja..how will it have a foothold on it?
Please clarify!!!

Looking forward to the GYAAN from ur side...btw me was in Ahmedabad only till late..do let me know if u wanna know any good hangouts in Ahmd when u go there..


Regards
Shankar~

[kabmilega]

Originally Posted by Shankx23

Hey KM,
Kewl stuf from u..hats off!!!U have been a boon to ppl like me who were novices to IB.
Me have a few question on what u said earlier!!!



Can u throw some light on this "tendered shares will be pro rated" Also in ur earlier post u said that Holcim wanted to have foothold on both Gujarat Ambuja and ACC. ACC is obvious but how about Gujarat Ambuja..how will it have a foothold on it?
Please clarify!!!


Looking forward to the GYAAN from ur side...btw me was in Ahmedabad only till late..do let me know if u wanna know any good hangouts in Ahmd when u go there..


Regards
Shankar~

With the strategic stake in ACIL Holcim will be in a Kind of Joint Venture with Guj Amb(GACM)...Another thing is that the Agreement with GACM has a provision which gives GACM the option of selling their remaining 33% in ACIL to Holcim in June...Later the two can form a consortium and take full control of ACC. So, in a way Holcim is in a great position. Another thing, you may have noticed is that GACM has secured a 50% stake in ACC without paying a single penny to anyone...a superb move on their part.

Coming to your 1st point, if the Tender Offer(TO) is oversubscribed, then every shareholder will get a pro rated acceptance of their tendered shares. for e.g if you have tendered 30 shares and the TO is oversubscribed twice then the acquirer will accept only 15 shares from your 30.


Coming to tactics: Lets start with Creeping Purchase - creeping Purchase is when an Investor/company starts buying shares in small quantities so as not to trigger disclosure norms. For e.g in the Indian Pvt banking industry no FII can buy more than 5%in a year without RBI Approval. So if you're a Foreign Pvt bank looking to grow inorganically in India by acquiring an already establlished Pvt. bank, then you can acquire 4.99% every year till you reach 14.99%. A Superb example would be the HSBC Bank Purchase in UTI Bank.

More later.

KM.

[Shankx23]

Originally Posted by kabmilega

With the strategic stake in ACIL Holcim will be in a Kind of Joint Venture with Guj Amb(GACM)...Another thing is that the Agreement with GACM has a provision which gives GACM the option of selling their remaining 33% in ACIL to Holcim in June...Later the two can form a consortium and take full control of ACC. So, in a way Holcim is in a great position. Another thing, you may have noticed is that GACM has secured a 50% stake in ACC without paying a single penny to anyone...a superb move on their part.

One question from your line of Gujarat Ambuja (GACM) getting 50% without having to pay anyone. Well as I understand the holding in ACC will be thru ACIL in which GACM has only 33% left after Holcim will raise its stake to 67%. Holcim being the majority equity holder in the ACIL will have the "Say" in ACC. So don’t get how the 50% can be ascribed to GACM alone after the Open offer of 36.21% comes through.

Also Read today’s Business Line, where in the move by The Chatterjee Group (TCG) and Access Industries Inc. (Owned by Russian born Oil Billionaire Leonard Blavatnik) is being discussed and explained with respect to their buy out of the Assets and Debts of the $ 8.4 Billion Dutch Petrochemical giant Basell NV (a 50:50 JV between Royal Dutch/Shell Group and BASF AG of Germany) for $5.7 Billion. The deal was worth over Rs. 25000 crores, so is by far the biggest acquisition by an Indian company ever which overtakes that of OVL’s 20% stake ($ 1.7 billion) buy in Sakhaklin Oil fields, Reliance Group’s buyout of Flag Telecom and the Tata acquisition of Tetley and Natsteel.

Can you please give your analysis of this move.!!!!

Creeping acquisition is clear.

I can give a local example where in the Ahmedabad based Torrent Group (of Torrent Pharma fame) has selected this method to increase its stake in the Utility Company, The Ahmedabad Electricity Company Ltd (Now known as Torrent Power AEC Ltd.) from @ 44% to reach 51%. The Company in the gist of the Balance Sheet printed in leading dailies gives details in each quarter on this, saying that the promoters have purchased so and so % shares by the creeping acquisition method.

Cheers!!
Shankx~

[goelrinku]

Investment banking is supposed to be a very well paying job. This implies the investment banking firms make a lot of money in deals.

The thing i wanted to know is how is their fees calcualted during M&A. Is it a lumpsum amount amounting to some percentage of the deal or a fixed amount not depending upon the deal.

Also, if suppose one firm is acquiring 20% of another firm, then on what basis do the investemnt banking firms charge fees from both the clients?

[goelrinku]

Kabmilega, can u throw a little light on delisting and reverse book building process

Originally Posted by kabmilega

Delisting is done throught the Reverse Book Building Process.

[goelrinku]

This is the 2nd tactic that acquireres use in M&As (courtesy kabmilega)

Greenmail is a situation in which a large block of stock is held by an unfriendly company. This forces the target company to repurchase the stock at a substantial premium to prevent a takeover. It is also known as a "Bon Voyage Bonus" or a "Goodbye Kiss".

This is a dirty tactic, but very effective

[kabmilega]

Originally Posted by goelrinku

Investment banking is supposed to be a very well paying job. This implies the investment banking firms make a lot of money in deals.

The thing i wanted to know is how is their fees calcualted during M&A. Is it a lumpsum amount amounting to some percentage of the deal or a fixed amount not depending upon the deal.

Also, if suppose one firm is acquiring 20% of another firm, then on what basis do the investemnt banking firms charge fees from both the clients?

Hi goelrinku

Normally in an M&A transaction, both the parties appoint different M&A Advisors. For e.g in The Oracle Peoplesoft merger Oracle appointed CSFB, Mckenzie while peoplesoft appointed Citigroup and Goldman Sachs. M&A advisors are paid various types of fees...some for Doing the Due Diligence and others for writing the Fairness Opinion. But, most of the times the Advisors are paid for Brokerage, legal Conformities, Advertising and Advisory. Fees are sometimes paid as a percentage of deal value, but most of the times it is a fixed amount varying according to the time taken to get all regulatory approvals.

Recently, fees have also assumed importance in the light of Rankings. Today, Blue chip Investment Banks are ranked according to Broad Parameters like Deal Size, Deal Fee etc. Last Year Citigroup was the top ranker in terms of deal fee as well as deal size(partly because of the peoplesoft merger) so its a matter of prestige in I-banking circles.

coming to Reverse Bookbuilding:

In India if any company ends up owning more than 90% of the share capital he has to delist the company through a process known as reverse book building. in this the Acquirer sets a Floor price for acquiring the shares and the shareholders are required to bid on or above the floor price at which they want to tender their shares. The exit price is decided according to the Maximum Bids that come at a particular price. in other words it is the reverse of the Bookbuilding process used in the price discovery process of IPOs. The upper limit is infinite, but the caveat here is that if the acquirer feels the price is too high he can Reject the offer. a recent example of RBB was E-serve Intl. where the Acquirer fixed 775 per share but had to hike it to 950 (or 975 i'm not sure) after theRBB process.

KM

PS: Goelrinku is absolutely bang on about Greenmail.

[illyas_is]

hello every one ...
i have some doubts ,thought it wud better to post here ...cos people here discuss somthing which i understand as finance:smile: so thought of posting here my questions r:
1. wat r "deravatives"...(only know that its a financial term) ?
2. and wat is "ORGANIC GROWTH"...(both terms associated with science too)?
i hope there is no inorganic growth:smile: just kiddin....


either u lead or follow ,or get out of the way ...:grab:

[goelrinku]

Ilyas...good to see u contributing

I am also pretty confused abt derivatives and want someone to explain it in layman terms

But i know abt ur second question

Organic growth is the growth of a company without any takeover, acquisitions and mergers. It is the growth that a company has by getting new projects or entering into new fileds by itself and hence expanding in terms of people, locations and assets.

And the term 'inorganic growth' does exists. It is just the opposite of organic growth. It takes place when a company grows by takeover, acquisitions and mergers. Example, Uinited Breweries recently acquired Shaw Wallace, so this is inorganic growth.

Originally Posted by illyas_is

hello every one ...
i have some doubts ,thought it wud better to post here ...cos people here discuss somthing which i understand as finance:smile: so thought of posting here my questions r:
1. wat r "deravatives"...(only know that its a financial term) ?
2. and wat is "ORGANIC GROWTH"...(both terms associated with science too)?
i hope there is no inorganic growth:smile: just kiddin....