The Viewpoint Hostile Takeovers My Way or the Highway?

In 1998, India Cements Limited made a hostile bid for Raasi Cements Limited with an open offer at Rs. 300 per share at a time when the share price on the BSE was Rs. 100. The investors felt cheated as the promoters themselves sold out their stake to the acquirer, leaving little room for them to tender their stake to the acquirer during the open offer. However, ICL further moved ahead to buy out the Financial Institutions of the company in an open offer and increased their holding in RCL to 85%. India’s largest housing finance company, HDFC Ltd and the largest private sector bank, HDFC Bank, merged in 2022 in one of the biggest financial deals in India. The $40 billion deal will result in a single entity, but the services of HDFC Ltd and HDFC Bank will continue to be provided separately.

Since these two companies happen to be two of the biggest giants in FMCG sector, an approval was sought from National Company Law Tribunal as well, following which, the deal was closed in April 2020. Since all three of the banks happen to be at least semi-government owned, compensation here is not applicable, but the government did infuse Rs 5042 Cr to enhance Bank of Baroda’s capital base and help it meet the new expenses. A lot of things can be attributed to the probable reason of this one, while the industry by itself was facing am ton of challenges operating in India, the advent of Jio was like the final nail in the coffin for both the company’s individual ventures. However, this wasn’t a cash deal, as the compensation was in stock payments, where Heritage group received 3.95% of Future Value Retail Ltd. Mergers and Acquisitions are an inevitable part of a market place, and by extension businesses.

In the process of merger, both the companies are comparatively of the same size and structure. Screening of Candidates The company needs to search and short-list the suitable candidates for takeover by taking into consideration, all the relevant factors mentioned above. Section 250 of the Companies Act, 2013 As per this section, NCLT has the power to direct any company administrator to take over the assets and management of that company. Today, there is hardly any large media house which is not owned by businesses. Notably, MukeshAmbani already has a sizable presence through Network18, which runs a number of channels, including news channel CNN-News18 and business channel CNBC-TV18. Employees may be involved in voting with management, making an aggressive takeover difficult.

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According to the report over60% of the dealsby volume and trade were attributed to industrial goods, energy, telecom, and the media sector. Update your e-mail and phone number with your stock broker/depository participant and receive OTP directly from depository on your e-mail and/or mobile number to create pledge. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.

Two of India’s largest media companies, Zee Entertainment Enterprises Limited and Sony Pictures Networks India , have agreed to a multibillion-dollar merger. Mergers are the consolidation of two or more firms into a single entity, with one company surviving and the other ceasing to exist. The deal made AT&T the world’s largest media and entertainment company. The deal made Comcast the largest media and entertainment company in the world.

Since there are various parties involved, the procedure is for quite some time drawn, monotonous, and on occasion problematic. Mergers and Acquisitions are an incredible way to accomplish development for an organization yet include complex steps and procedures to be trailed by the involved companies to shape the new business. Notice Dispatched to Shareholders and CreditorsWith the earlier approval of the High court, a notification ought to be sent to all the investors and creditors of the organizations about the gathering to be held, and 21 days of timely notification is required. The notification will be distributed in two papers, one in the vernacular language of the state, and the other one is an English paper. Vertical MergersThis type of merger happens between those entities who are involved in the dealing of complementary goods and services. Cash reserves and foreign direct investment inflows are at record highs, private equity dry powder is plentiful, and interest rates are at historic lows.

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It takeover examples in indias in a dilution of the ownership interest of the acquiring company. Since the news channel has claimed that the 29.18% of NDTV has been acquired without “notice, discussion, or consent”, some are even calling it a ‘hostile takeover’. The media house said that the debt was converted into equity without even taking any input from the founders or the company. VMWare merger with DellIt is an American cloud computing and virtualization technology company, founded in 1998 by Mendel Rosenblum, Diane Greene, Scott Devine, Ellen Wang, and Edouard Bugnion. VMWare did reverse turnover with Dell, an American technology enterprise for a price with a plan to be back as a public company in the stock market. NYSE merger with Archipelago HoldingsOne of the world’s oldest and largest stock exchanges, which is situated on Wall street, New York city since 1792.

Financial Institutions also held a considerable stake in RCL, and so a protracted battle ensued between ICL, RCL and the Financial Institutions. During the term of the public offer, the promoter of RCL reached a deal to sell his 32 percent stake to ICL at a price which was lower than the open offer price. Subsequently, ICL also bought out the Financial Institutions in an open offer and increased their stake in RCL to 85 percent. Takeovers haven’t been prohibited anywhere within the code nor has it been discouraged. The whole intention of the Indian law makers has been to forestall the premiums of investors and speculators during such acts.

We’ve already seen above that the reasons for M&A may be extremely varied. Mergers and Acquisitions (M&A) have increased in the Indian subcontinent over the years. These deals play a very important role in the growth of any company in the long term and also in the economy.

What Is Hostile Takeover?

However, while doing this the policy makers adopted a really protective policy which successively made hostile takeovers resemble a feared apparition. This over protectionism wasn’t favoured by major economy players within the world owing to the recent trends of globalisation and opening up of domestic markets for international players. So to cater to the needs of changing society the policy makers have come up with a new Takeover Code which would be implemented by 2011 in all probabilities.

In April 2020, Hindustan Unilever Limited merged GSK Consumer Healthcare of GlaxoSmithKline . This is one of the biggest examples of synergistic alliances we discussed earlier. While this deal provided HUL the products of Horlicks and Boost, another product line extension, GSK used these funds to establish its production in Bangladesh, following the western practice. It is said that a decade before this deal, Tata expressed interest in selling off Tata Motors to Ford.

A profit-earning company takes over a sick company and becomes the owner of the formed company. Section 261 of the Companies Act, 2013 According to this section, NCLT authorises a company administrator to prepare a scheme of rehabilitation and revival, including the takeover of a sick company by a solvent company. Section 230 of the Companies Act, 2013 This Section deals with every form of compromise and arrangement. Increase in Business Size Takeover is the best way for a company to expand its business operation in a short duration.

What is the meaning of a hostile takeover?

It is often used as a way to take over a company by another company or individual hostilely. The main aim behind the process of screening is that the company needs to search and short-list the suitable candidates for takeover. The term ‘consideration’ refers to the amount paid for the acquisition of the target company. The regulations that are governing the concept of takeover Section 230 of the companies Act 2013, SEBI Regulation 2011, Section 250 of the Companies Act 2013, Section 261 of the Companies Act 2013. The steps included in the procedure to take over a company in India are determining the market; identification of candidates; evaluation of financial position; take the final decision; assessing the value of the market; Due Diligence; and Implementing Takeover. The types of mergers are Vertical, Horizontal, Conglomerate, Co-centric, Forward, Cash and Backward Merger.

While he was ultimately unsuccessful, Paul’s hostile threat sent shockwaves through the Indian business world. Walmart’s acquisition of Flipkart is the biggest ever in India, with the US-based retail giant spending $16 billion. But this buyout isn’t the first big takeover we’ve seen in the country. Here’s a list of some of the biggest mergers and acquisitions India has seen. In 2012, Essel Group attempted to take control of IVRCL, an infrastructure company. After acquiring a 10.7% position in IVRCL, Essel Group reversed course and opted to sell its shares in the target firm.

Zee’s board of directors gave in-principle approval for the execution of a non-binding term sheet with SPNI. According to research, more than $310 billion was spent on mergers and acquisitions between 2015 and 2019 in India. This article focuses on the procedure of reverse mergers, motives, and challenges that arise in the context of the Indian market and the approach of the judiciary towards the same. May attempt to profit from a hostile takeover by buying shares of the company being targeted in the hopes that the takeover attempt will be successful and the value of the shares will increase.

These restructuring moves are critical to the long-term prosperity of any firm as well as the economy. 21st May 2013, clearly stated that listed companies undergoing mergers need mandatory approval from SEBI. Now there are stringent requirements for listed companies that intend to go through mergers. As per the current situation, the reverse merger is not prohibited but is strictly regulated by the Companies Act 2013 and SEBI.

• S can also be a way for a company to take control of another company without paying a fair price.
• This over protectionism wasn’t favoured by major economy players within the world owing to the recent trends of globalisation and opening up of domestic markets for international players.
• In this, the acquirer company does not obtain any prior assent of the target company and forcefully pursues the process of takeover.
• The open offer for the acquisition of 31 percent shares of Mindtree is to commence on May 14, 2019 and end on May 27, 2019.

In February 2017, CBS acquired a majority of shares in Entercom and acquired it for the purpose of spinning off its former parent CBS radio. Godrej Soaps merger with GodrejIn 1994 Godrej Soaps, a consumer product manufacturing business did a reverse merger with its loss-making subsidiary unit ‘ Gujarat Godrej Innovative chemical’ and named it ‘Godrej Soaps Ltd’. There is no assurance of the investors obtaining sufficient liquidity after the merger. Due to financial and operational crises, sometimes, small companies may not be ready to be in public.

When a company acquires 5% or more of another listed company then it has to make a disclosure of all its holdings within 2 days of acquisition of shares. When a company acquires 5% or more shares of the target company then it is called as substantial acquisitions of shares. A major stake of shareholdings of the company was with the investors out of which V.G.Siddhartha was one of the first investors in the company and had a major stake of 20.41% but in the year 2019, he sold his entire shares to L&T to cut down his debt. LnT already had some more percentage of shares in the company and after getting shares from V.G.Siddhartha their total shares reached to 29%. Then the government gave them an open offer and they acquired 31% more shares through open offer.

The Companies Act of 1956 did not restrict or prohibit reverse mergers in any manner, but the Companies Act of 2013 seeks to put certain restrictions on backdoor IPOs or, in other words, reverse mergers. Section 232 of the Companies Act 2013 states that in case of amalgamation between a listed and an unlisted company, the final entity will be treated as an unlisted company. This provision is significant as it prevents private companies from getting the benefits of publicly listed companies through the backdoor. Under the Companies Act of 2013, listed companies that were supposed to undergo mergers needed approval from the Court and stock exchange.

Zomato’s fleet will include delivery partners who were formerly involved with Uber Eats India, according to Goyal of Zomato. Practically everyone was talking about the greatest e-commerce deal ever when Walmart Inc. successfully purchased a 77 per cent share in Flipkart. The parent firm, ONGC, anticipates that the merging of OMPL and MRPL will increase cooperation between the two subsidiaries on matters like product supply pooling.

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