An unprecedented increase in mergers and acquisitions in the first quarter of 2018
The first quarter witnessed an unprecedented record of $1.2 Trillion.It was perhaps triggered by US Tax reforms and buoyant activity in the European market.
Consolidation is the latest buzz word in Indias Energy Industry
Recently Tata Power Co Ltd had aquired the 1.1 gigawatt renewable energy portfolio of Welspun Energy Ltd for $ 1.4 billion. Also, Greeko Energy Pvt Ltd has aquired SunEdison Inc's Indian assets for $ 392 million.
Competition Commission of India approves Tata Steels proposed acquisition of Bhushan Steel
CCI said it "finds no Appreciable Adverse Effect on Competition (AAEC)" in respect of Tata Steel's proposed acquisition of Bhushan Steel".Last month, Tata Steel said it had won the bid to acquire Bhushan Steel under the insolvency process. Tata Steel is to acquire, either directly or through a wholly owned subsidiary, 75 percent or more of the total issued and paid up share capital of Bhushan Steel, as per the notice submitted to the CCI
Opposition against T Mobile Sprint merger(3/8/18)
The founder of Boost Mobile USA says that the merger should happen only if Boost and Metro PCS are spun off. Boost is owned by Sprint and MetroPCS by T Mobile.
Sprint Corporation is an American telecommunications company that provides wireless services and is an internet service provider. It is the fourth-largest mobile network operator in the United States and serves 54 million customers as of October 2017.The company also offers wireless voice, messaging, and broadband services through its various subsidiaries In July 2013, a majority of the company was purchased by Japanese telecommunications company SoftBank Group Corp.although the remaining shares of the company continue to trade on the New York Stock Exchange. Sprint uses CDMA, EvDO and 4G LTE networks.
T-Mobile is the brand name used by the mobile communications subsidiaries of the German telecommunications company Deutsche Telekom AG. The brand is active in Austria (under the subsidiary T-Mobile Austria), the Czech Republic (T-Mobile Czech Republic), the Netherlands (T-Mobile Nederland), Poland (T-Mobile Polska), and the United States (T-Mobile US). The name was previously used by subsidiaries in other countries, including Albania (now Telekom Albania), Croatia (now Hrvatski Telekom), Germany (now Deutsche Telekom), Hungary (now Magyar Telekom), Macedonia (now Makedonski Telekom), Montenegro (now Crnogorski Telekom), the United Kingdom (now EE Limited), Romania (now Telekom Romania), and Slovakia (now Slovak Telekom)
Tata Steel aquires Bhushan Steel .
Tata Steel has bought Bhushan Steel Ltd .Tata Steel Ltd had won the bid to acquire debt-laden Bhushan Steel Ltd (BSL) in an insolvency auction. The bankrupt firm was among the 12 stressed assets the RBI had referred for NCLT proceedings last year. Bhushan Steel had debt in excess of Rs 40,000 crores.A cosortium had claimed around Rs 55000 crores .The consortium included SBI and the infamous PNB.
This is being considered as the first big bankruptcy success.
Liberty Global merges with ZIGGO then merges its Dutch operations with Vodafone.
Ziggo, the large Dutch cable operator has been aquired by Liberty Global. They were the two main cable TV operators in Netherland. Since the two accounted for separate and a large volume audience, the aquisition had been questioned for leading to monopolistic environment. However, the European Commission has approved the deal with certain conditions.In related developments Vodafone has agreed a deal with US cable giant Liberty Global to merge their Dutch operations, continuing the rapid pace of merger-making in European telecoms markets.Now Vodafone shall provide converged services in the Dutch market.
GEIS acquired by ABB
ABB has acquired General Electric Industrial Solutions for $2.6 billion. GEIS will be integrated into ABB’s Electrification Products (EP) division.The combination reinforces ABB’s position as a worldwide leader in electrification and accelerates its growth and competitiveness in key markets, particularly North America. As one of Thomas Edison’s original businesses, GEIS is considered the cradle of electrification .
Reliance communications to complete Asset sale soon.
The asset sale to Reliance Jio Infocomm and Canada's Brookfeild was expected to be completed soon after the bankruptcy appeal court halted insolvency proceedings of insolvency.Subsequently,the Supreme Court had also given its clearence. However the deal is presently on hold because of intervention of the Department of Telecommunication.The Department of Telecommunications (DoT) has held up the sale on the ground that Reliance Jio has refused to accept the responsibility for paying any spectrum arrears that may fall due to the government as RCom's dues.
Latest on TMobile Sprint merger
The proposed merger to reduce / eliminate competition. The Justice department of the US is evaluating the effect of the merger on smaller wireless companies. There are fears that with less competition monopolistic pricing could be detremental to the ultimate consumer. April 2018 — Both companies agreed to merge under the T-Mobile banner, meaning Sprint would be absorbed by T-Mobile rather than creating a new company name.T Mobile P/E ratio was arount 26 in the year 2017 whereas Sprint had a P/E Ratio of around over 3
Sequesnce of events relating to proposed merger,
May 2018 — Marcelo Claure — Sprint’s CEO — steps down from his position. Takes another job with SoftBank, Sprint’s parent company.
June 2018 — Investigations on the proposed merger start by the U.S. Justice Department.
June 2018 — John Legere — T-Mobile’s CEO — defends the proposed merger.
August 2018 — The DoJ approves the three fold formula of carriers stating that was exactly what was needeed to provide robust 5G competition.
September 2018 — The FCC stalled its decision process on the merger, saying it needed more time.
October 2018 — The T-Mobile Sprint merger received shareholder approval.
South East Asia to be preferred location for buyouts .
According to Coller Capital’s latest Private Equity Barometer.South East Asia is the preferred location of PE/VC investors.Developed markets in the Asia Pacific region may stand to lose out.
Southeast Asia’s infrastructure – mobile, logistics, etc. are extremely fast growing . This may nail down investments in India, Japan , Australasia etc.
Working Capital Loans will no longer be 100% cash credit in India
RBI has introduced some changes in the requirements of working capital loans.
The draft stipulates a minimum level of 'loan component' in fund based working capital finance and a mandatory Credit Conversion Factor (CCF) for the undrawn portion of cash credit/ overdraft limits availed by large borrowers, it said.
Companies which have a working capital loan of Rs 150 Crores or more shall have to consider at least 40% of the amount as loan component. This shall gradually be increased to 60% over the coming year(2019). It is expected that the above mentioned change shall help companies manage liquidity in a better way than what is done now.
Credit Conversion Factor
Following type of two products are frequently encountered in the banking system,
1. Loan : here bank has parted away or given from its pocket to borrowers who will be paying the same in future. In such products bank is exposed to credit risk.
2. Off balance/ contingent products: in these products the bank has not parted with any money at the start but has promised or obligated to provide the money when the need arises from customer's side.
Basel framework stipulates that banks have to calculate their credit risk capital . Hence the credit risk capital need to be calculated for above products types.We know that the off balance product does not have direct credit risk compared to loan products. Hence its is required to use some factor which will convert off balance product amount equivalent to loan product amount. This factor is called credit conversion factor or CCF.
CCF may be seen as probability of off balance sheet exposure converting into loan exposure (on balance sheet).
Global companies working hard to mine on Asteroids
Companies like Deep Space Industries and Asteroid Mining Corporation are busy building machines which could help them mine several 1000s of crores worth of minerals to be finally brought on earth. It shall then become difficult to manage the world economy .
Interface acquires Nora Systems (7/8/18)
Atlanta-based Interface, a global commercial flooring manufacturer, has acquired Nora Systems, a leading manufacturer of rubber flooring. Interface has acquired Nora in a stock purchase valued at roughly $420 million.Founded in 1938 in Weinheim, Germany, Nora Systems is a private limited company owned by investment firm Intermediate Capital Group. It has more than 1,000 employees across the globe, Nora's annual revenue is approximately $280 million. This acquisition deal will expand interface's portfolio and increase its presence in other industries, including healthcare and education.
ADM diversifies into probiotics with $243 million aquisition of UK manufacturer(23/7/18)
Agricultural commodities giant Archer Daniels Midland Co. has diversified into the microbiome space with the acquisition of UK-based manufacturer Probiotics International Ltd. in a cash deal worth $243.5 million (£185 million) Our body contains more than 100 trillion bacteria and other microbes collectively known as microbiome, the research of which investigates how these bacteria and microbes affect our health.Probiotics International Limited produces research based live bacteria products for veterinary, human, agriculture, and equine healthcare markets. The Archer Daniels Midland Company (ADM) is an American global food processing and commodities trading corporation, headquartered in Chicago, Illinois.[2][3][4] The company operates more than 270 plants and 420 crop procurement facilities worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical, industrial, and animal feed markets worldwide.Prior to the aquisition the operational cash flow to debt ratio stood at over 21 % for the previous year. Cash investments were always on the card.
SEBI issues guidelines to split the CMD post - listed firms (23/7/18)
From 2020 onwards the practise of having one person appointed as Chairman and Managing Director shall cease. According to guidelines issued by SEBI , the Chairman will have to be a non executive director and the post of Managing Director shall be independent.
Idea Vodafone merger
The merger creates Vodafone Idea Limited, the largest carrier in India by subscribers and revenue market share.The two companies were facing difficult times because of the price war launched by Jio with deep pockets.Vodafone Group plc is a British multinational telecommunications conglomerate, with headquarters in London and Newbury, Berkshire.It predominantly operates services in the regions of Asia, Africa, Europe, and Oceania.Vodafone India was the Indian subsidiary of UK-based Vodafone Group plc and was a provider of telecommunications services in India with its operational head office in Mumbai. As of March 2018, Vodafone India had a market share of 21% with approximately 223 million subscribers and was the second largest mobile telecommunications network nationally after Airtel.
The merger has resulted in the creation of the largest mobile services operator in India.The merged entity shall deal with approximately 43 crore subscribers with valuations totalling Rs 1.5 Lakh crores.Vodafone will own 45.1% in Vodafone Idea Ltd, Aditya Birla Group 26% and Idea shareholders 28.9%. The Aditya Birla Group holds a right to acquire up to a 9.5% additional stake from Vodafone so as to equalise shareholdings over time.In case Vodafone and the Aditya Birla Group’s shareholdings in the combined company are not equal after four years, Vodafone will have to sell down shares in the combined company to equalise its shareholding to that of the Aditya Birla Group over the following five-year period. Until equalization , the voting rights of the additional shares held by Vodafone will be restricted .
Together, Vodafone India and Idea Cellular have debt of around 1.15 trillion equaling over Rs 1 Lakh 15 thousand Crore.
Mega IPOs on offer in India(2/7/2018)
The equity market has seen a lot of volatility this year ; however, there are a large number of companies planning to raise long term capital through the issue of equity shares in the primary market. Companies planning an IPO include Acme Solar Holdings (Rs 2,200 crore), Barbeque Nation Hospitality (Rs 700 crore), CMS Info Systems (Rs 1,300 crore), Devi Sea Foods (Rs900 crore), Garden Reach Shipbuilders (Rs 1,000 crore), Indian Renewable Energy Development Agency (Rs 900 crore), Nakshatra World (Rs 650 crore), Nazara Technologies (Rs 1,000 crore) and Rail Vikas Nigam (Rs 3,000 crore). In case all these issues materialise 2018 may be a golden year as far as issues of IPOs are concerned
The buying of Times Warner by AT&T and its proposed demerger
· AT&T has bought Times Warner.
· AT&T shall get immense boost in the content area.It will be able to market all entertainment of Times Warner to various cable operators.
· President Trump of the US has been a long opponent of this deal .He fears too much power should not go in a few hands. CNN belongs to Times Warner .
· DOJ is again looking into the matter.
· If the merger is officially blocked, AT&T would be required to pay Time Warner $500 million in a so-called "reverse break-up fee" — but Time Warner stands to lose more. The company would lose out on an $85 billion acquisition, which would have gone directly to its shareholders and executives.
· A fall in stock prices happened immediately after the deal was done.
RBI hikes Repo and reverse REPO rates (3/8/18)
The REPO rates have been increased by 25 basis points . They stand at 6.5% now. Reverse REPO has been hiked to 6.25%. Repo rates prevail when RBI lends to other banks while reverse repo is the rate at which the RBI borrows from other banks.