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Biggest cases in Mergers and Acquisitions in India

Over time, the Indian subcontinent has seen a growth in merger and acquisition (M&A). These restructuring moves are critical to the long-term prosperity of any firm as well as the economy. Mergers and acquisitions (M&A) have long been a popular way to enter new markets and expand existing ones.

The regulatory and prohibitive measures of the MRTP Act, 1969, are a major influence on the entities involved in the merger. A company taking over another company happens more often than you might expect. Acquisitions are the term for these types of takeovers. Mergers happen when two or more companies combine to form a single entity. These mergers are known in India as ‘Amalgamation.‘

Mergers & Acquisitions help a firm achieve its growth goals. Mergers & Acquisitions could be part of a company’s strategy to grow market share, expand geographically, lessen competition, profit from patents, or even enter new markets. As a result, businesses take advantage of other companies that are underperforming or governments that are willing to sell their assets.

According to research, more than $310 billion was spent on mergers and acquisitions between 2015 and 2019 in India. In terms of volume and trade, over 60% of the transactions involved industrial products, energy, telecom, and media. The changing landscape with the increased availability and use of the internet is one of the key causes for the increased competitiveness in the Mergers and Acquisitions field. In this article, we will go through a few top cases in the field of mergers and acquisitions in India.

1. Zee Entertainment – Sony India Merger

Zee Entertainment Enterprises Limited (ZEEL) and Sony Pictures Networks India (SPNI), two of India’s biggest media conglomerates, have taken the first steps towards a multibillion-dollar merger. The Zee board of directors approved the merger between the two companies. The agreement has the potential to make the newly created company one of the country’s largest and most sought-after.

Sony Pictures Entertainment would invest $1.575 billion in the newly consolidated firm as part of the acquisition. On September 22nd, Zee’s board of directors gave in-principle permission for the execution of a non-binding term sheet with SPNI. In addition, the two parties will sign a non-compete agreement. 

2. Indus Tower – Bharti Infratel Merger

Indus Towers was a joint venture between Bharti Infratel, UK-based Vodafone Group Plc, and Vodafone Idea. Bharti Infratel and Vodafone Group held 42% stakes each in Indus. Vodafone Idea held an 11.15% stake and the remaining 4.85% was with private equity firm, Providence. Airtel has a majority stake in Bharti Infratel.

The aggregate shareholding of Bharti Infratel in the combined entity will change from 53.51% to 36.73%; Vodafone Group’s shareholding will change to 28.12 %. The merged entity will have Bharti Airtel at 36.7 % stake in the merged entity, Vodafone UK (28.1 %), Providence Equity Partners (3.1%) with public holding (35.2%), 

Vodafone Idea Limited (VIL) will receive an all-cash amount of ₹3,760 crores for its 11.15% shareholding in Indus which it will sell off. The newly merged entity will be called Indus Towers. The merged entity will have  172,000 towers with a tenancy of 1.83x, annualized revenue of Rs 25,400 crore, and Ebitda (earnings before interest tax depreciation and amortization) of Rs 12,500 crore, as per reports from CLSA.

3. Vodafone Idea Merger

Reuters reported the Vodafone Idea merger to be valued at $23 billion. Although the deal resulted in a telecom giant it is safe to say that the 2 companies were pushed to do so due to the entry of Reliance Jio and the price war that followed. Both companies struggled amidst the growing competition in the telecom industry.

The deal worked both for Idea and Vodafone as Vodaphone went on to hold a 45.1% stake in the combined entity with the Aditya Birla group holding a 26% stake and the remaining by Idea. On the 7th of September, Vodafone Idea unveiled its brand new identity ‘Vi’ which marked the completion of the integration of the 2 companies. 

4. Arcelor Mittal

The biggest merger valued at $38.3 billion was also one that was the most hostile. In 2006, Mittal Steel announced its initial bid of $23 billion for Arcelor which was later increased to $38.3 billion. This deal was frowned upon by the executives because they were influenced by the patriotic economics of several governments.

These governments included the French, Spanish, and that Luxembourg. The very fierce French opposition was criticized by the French, American, and British Media.

The Indian commerce minister Kamal Nath even warned that any attempt by France to block the deal would lead to a trade war between India and France. The Arcelor board finally gave in to the deal in June for the improved Mittal offer. This resulted in the new company Arcelor-Mittal controlling 10% of global steel production.

5. Tata and Corus Steel

Tata’s takeover of Corus Steel in 2006 was valued at over $10 billion. The initial offers from Tata were at £4.55 per share but following a bidding war with CSN, Tata raised its bid to £6.08 per share. Following Corus Steel had its name changed to Corus Steel and the combination resulted in the fifth-largest steel-making company.

The following years were unfortunately harsh on Tata’s European operations due to the recession in 2008 followed by reduced demand for steel. This eventually resulted in a number of lay-offs and sales of some of its operations. 

6. Walmart Acquisition of Flipkart

Walmarts acquisition of Flipkart marked its entry into the Indian Markets. Walmart won the bidding war against Amazon and went on to acquire a 77% stake in Flipkart for $16 billion. Following the deal, eBay and Softbank sold their stake in Flipkart. The deal resulted in the expansion of Flipkart’s logistics and supply chain network.

Flipkart itself had earlier acquired several companies in the eCommerce space like Myntra, Jabong, PhonePe, and eBay.  

7. Vodafone Hutch-Essar

The world’s largest mobile operator by revenue – Vodafone acquired a 67% stake in Hutch Essar for $11.1 billion. Later in 2011 Vodafone paid $5.46 billion to buy out Essar’s remaining stake in the company. Vodafone’s purchase of Essar marked its entry into India and eventually the creation of Vi. Unfortunately, the Vodafone group was soon embroiled in a tax controversy over the purchase with the Indian Income Tax department. 

Vanshika Jaiswal
Vanshika Jaiswal
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