VOLUME II

SYMBIONT
ISSUE 11

28th September 2010

KNOW HERE
When President Obama called ‘in’ to
The Indian IT
perplex India and China
Sector, gets 60% An insight to the Ohio outsourcing ban has left the Asian countries by surprise
of its exports By Akash Sablok
revenue from the
US, comments India- China and the United States of overseas jobs, he proposed a more gen-
Obama's move as America. That’s the way the world re- erous, permanent extension of the tax
discriminatory fers to the three countries today. The credit that goes to companies for all the
and unjustified power of unison of the potential of In- research and innovation they do it in
dia and China devours a lion share from America.
the spill over effect of US and US in
turn adds up greatly to the growth and It had caused the US Ohio state 4,
ob opportunities of countless Indian 00,000 jobs alone to outsource and
INSIDE THIS ISSUE youth today, who are successfully thriv- hence, the end of federal tax breaks
(Click on the ing on the companies who have injected was necessary. Outsourcing is clearly a
article title) dollars worth of rupees in the burgeon- key issue in the forthcoming US elec-
Taisho Pharma 4
ing pockets. tions in November, particularly in
firms hold on Ohio, which only last week, bowed to
Paras PHARMA The US private sector is the primary populist pressure and banned outsourc-
Amrutanjan tar- 5 source of outsourcing to India. Nearly ing to overseas companies, which has
gets a beverage 60 per cent of India's software revenue raised an outcry in India.
company comes from outsourcing, and a large
chunk of it from the US. The US com-
D B Realty 6 Significantly, the tax breaks that
panies, are shifting jobs to India for
Acquires L&T Obama is referring to relate to corpo-
lower labour costs and operational effi-
rate tax. And US companies, over the
KEC Int to buy 8 ciency and the tax issue will not be
SAE Towers years have moved a lot of their offices
enough of a detriment to discourage
to countries in Europe which have
Crossword 9
them from continuing to do it.
lower tax rates than the US. This has
meant that the US government has
US President Barack Obama on Sep-
Case Study 10 been denied tax revenues from these
tember 8, 2010 in Ohio had condemned
countries because of double taxation
the outsourcing of American jobs to off
avoidance arrangements.
QUIZ 11 shore locations and reducing costs but
also reducing the ob opportunities to
American nationals. Instead of tax If Obama wants to change that, India
loopholes that incentives investment in and China are much affected. That's

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P AGE 3
because US companies operating in Asian countries
do so to arbitrage labour costs, not taxes, because In-
dian corporate tax rates are actually higher than the
US.
The three main benefits that accrue US and derange
India and China’s growth opportunities are:
1. Employment creation: US delivers a lot of itsjobs
to Indian companies giving direct employment to
nearly 10, 00, 000 techies in India. The major cities
that have featured in the world’s best places to out-
source comprise of India and China.
According to A.T. Kearney’s Global Services Loca-
tion Index 2009 (GSLI), a ranking of the most attrac-
tive off shoring destinations, Central/Eastern Europe
is falling off the radar while Southeast Asia and Mid-
dle East countries are gaining popularity.
India (position in 2007 GSLI: 1)
China (2)
Malaysia (3)
Thailand (4)
Bankruptcy is a legal proceeding in which you put your money in your pants pocket
and give your coat to your creditors—Joey Adams
3
2. Cost: Though the US companies outsource
to India courtesy the low costs that accrue to
them, yet, it accounts for nearly 14% of the
GDP in India. The growth of companies and
development of technology based companies
that do research and development and cus-
tomer relationship management related jobs
at a fraction of US dollars, can see a major
fall in their revenue.
3. Knowledge Outsourcing: The quality of
developers and the research teams founded in
India comprise of highly skilled technicians
and managers and to replicate the quality to
US needs a major investment in education
and skills enhancement. It requires major
time and cost.
Some major companies that have inked deals
with US based companies which comprise
more than 80 percent of their revenues are:
1. Avalon Consulting LLC
2. Accenture
3. Cognizant
4. Capgemini
It gives the entire technology and BPO sector
in India to see two things:
1.To what limit are the taxes scheme
amended to accommodate off shore invest-
ment.
2. Which domains and functions witness di-
vestment from the MNCs.
India and China have to regain the world posi-
tions of the leading countries to outsource, it
remains to see, how they had founded their
capacities to develop in house capabilities.
V OLUME II P AGE 4

Taisho Pharma firms hold on Paras

Pharmaceuticals
Paras is an attractive target for Taisho as it is looking for inor-
ganic growth outside of its home market
By Deepika and Jose
DATE Undecided
ACQUIRER Taisho Pharmaceutical, Japan
ACQUIREE Paras Pharmaceuticals, India
DEAL VALUE Undisclosed
DEAL NATURE Acquisition
PURPOSE To strengthen the company’s growth in the inorganic
market through expansion to Asian countries like India
QUOTE
MD of Godrej Con-
sumer Products Ltd.,
Japanese pharma major Taisho Phar- Pharma, plan to sell their stake in the
A Mahendran said,
―There is no proposal maceutical Co. Ltd., as well as at company for more than $700 million
on the table yet. In least one other leading non-Indian or Rs 3,350 crore. Morgan Stanley,
case it comes, we will drug firm, is conducting due dili- which holds the mandate to sell, is
certainly examine it gence on Actis Capital and Sequoia expected to float expressions of in-
and look at all Capital investee Paras Pharmaceuti- terest to potential buyers next
possibilities.‖ cals. The company had already ap- month.
plied for Foreign Direct Investment
approval from the Indian authorities. On September 9, 2010, Emami was
interested in buying stake in Paras
E
FACT FIL Some potential buyers of Paras Phar- Pharmaceuticals Ltd. GlaxoSmith-
capital and
Through its maceuticals are considering the op- Kline Consumer Healthcare Limited
ve tie-up
administrati tion of collectively bidding for the (GCHL) and Godrej Consumer Prod-
a Chemical
with Toyam is INR 5 billion company and are plan- ucts Ltd. has denied that they are in
e company
Co., Ltd., th ning to divide the assets among them. talks with Paras Pharmaceuticals to
eliver a
striving to d This is mainly because Paras Pharma buy stake.
edications
lineup of m has a diversified portfolio and differ-
nts to help
and treatme ent companies may want different Some rival potential suitors of Ah-
pan and
people in Ja r assets. Additionally, Paras is turning medabad-based Paras Pharmaceuti-
world riche
around the out to be an expensive buy. Private cals are considering the option of co-
v es b y im p roving their
li equity firms Actis Advisors and Se- bidding for the Rs 500-crore com-
healt h.
quoia Capital India Advisors, which pany and splitting the assets between
together hold around 70% in Paras them. Paras also operate a hospital
in western India.

―Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income
twenty pounds, annual expenditure twenty pound ought and six, result misery‖ - Charles Dickens

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P AGE 5

Amrutanjan expands with a target of a

beverage company DATE
It also includes a wide scope expansion plan of health clinics
Undecided
primarily in South India
By Anjali and Chippy ACQUIRER

Amrutanjan Health-
Amrutanjan is one of India‟s biggest care, India
conglomerates with business stretch in
ACQUIREE
not only to medicine business but also
Information technology and Printing. Undisclosed

DEAL VALUE

Rs.20 Crores
Amrut anjan Healt hcare Lim- plans to diversify into pain clinics.
(Approximately)
ited wants to enter the food & bever- For the same, it has opened 4 pain
ages business by acquiring a bever- relief clinics in Chennai and plans to DEAL
age company with a turnover of open such Clinics in Hyderabad and NATURE
about Rs 20 Cr. The Rs 100-crore Bangalore. Their major sale comes Acquisition
company has also decided to diver- from Tamil Nadu, Andhra Pradesh,
sify into pain clinics. Karnataka and Maharashtra to some PURPOSE
extent and it plans to strengthen its
To strengthen the
The company is in talks with some sales in these states with a target of company business
established brands and the deal is Rs 120 Cr in FY2011 from Rs 100 into healthcare as
expected to complete soon. No tar- Cr in last year. It holds the market well as food and
get company’s name is revealed yet. share of 10% in Rs 1000Cr pain beverages
Amrutanjan Healthcare is a pain balm market in the country.
management company. Its business
is divided into two segments: over- Amrutanjan is still one of the largest TRIVIA
the-counter (OTC) products and players in the Rs 250 crore balm Amrutanjan will soon
pharmaessense chemistry services. markets. Etched firmly in the mind launch an anti-cancer
of the consumer, Amrutanjan sus- drug Vinblastine based
Its OTC products include Amrutan- tained competition, generations and purely on herbal ex-
jan pain balm (Ayurvedic), hero su- maintained its relevance in the In- tract of Vinca Rosa
per balm and dragon liquid balm and dian market. The brand has a huge plant, one of the
dermal ointment 16 grams, Amru- equity in the Indian market and all world’s first compa-
tanjan cold Rub, mint, decorn & along has been trying to extend its nies to laboratory try
nogerm hand sanitizer. The company equity to various categories. that.

“A corporation's primary goal is to make money. Government's primary role is to take a big chunk of
that money and give it to others.” - Larry Ellison

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V OLUME II P AGE 6

D B Realty Acquires L&T Bombay

Developers
L&T Bombay Developers is now a wholly owned subsidiary of
DB Realty.
By Surya and Nelson
DATE September 15th, 2010
ACQUIRER D B Realty, Mumbai
ACQUIREE L&T Developers, India
DEAL VALUE Undisclosed
DEAL NATURE Acquisition
PURPOSE To develop and promote residential and commercial
complexes in all the leading cities and metros.

D B Realty Ltd has acquired 100%
stake in L&T Bombay Developers
Ltd (LTBDPL), a special purpose ve-
QUOTE hicle formed by L&T Urban Infra-
structure Ltd (LTUIL) and Bombay
Mr K. Venkatesh, Dyeing and Manufacturing Co
Senior Vice- Ltd (BDMC) for development of MIG
President, L&T, said colony, situated at Bandra (East),
the decision to exit Mumbai.
was mutual, as the
combine saw no visi- L&T Bombay Developers is now a
bility or momentum in wholly owned subsidiary of DB Re-
the project after four alty.
to five years.
The Middle Income Group Co-
operative Housing Society Ltd was a
part of the MIG Colony. The Society
was entitled to the piece and parcel of
land admeasuring around 20,000 sq ft
land (including recreation ground) at
the Gandhi Nagar layout, Bandra
(East). The Society had put up a ten-
der for re-development of the said
property and awarded the tender to
LTBDPL, in which both LTUIL and
BDMC were equal shareholders.
DBRL is part of the Dynamix Bal-
was Infrastructure Pvt Ltd which
also has interests in hospitality,
power and telecom. DB Realty is
engaged in developing residential
and commercial properties mostly in
and around Mumbai. It has 10 ongo-
ing projects, aggregating approxi-
mately 18.61 Million Square Feet of
saleable area, 9 forthcoming pro-
jects, aggregating approximately
20.17 Million Square Feet of sale-
able area and 6 upcoming projects,
aggregating approximately 22.11
Million Square Feet of saleable area.
The company plans to develop 44
Million sq ft this year, which in-
cludes properties in Abhyudaya Na-
gar at Kala Chowkie of 3 million
Square Feet through a 60:40 joint
venture with Shreepati Group.

I think you have to work with people, and when I talk about managing relationships, don‟t think the de-
rogatory „„managed relationships‟‟. It is a question of sharing emotion and feelings. - Anil Ambani

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P AGE 7

IFGL bites chunk off two US firms

The acquisition is meant for IFGL to strengthen its business
foothold in US. DATE
By Tom and Sai September 12th, 2010
“The acquisition will help us strengthen
our foothold in America. The two firms ACQUIRER
will play a pivotal role in our expansion
plans. Moreover, CUSC also owns about IFGL Refractories
2.74 acres of land with a built-in ware-
house,” said Pradeep Bajoria, IFGL‟s ACQUIREE
managing director.
EI Ceramics and
CUSC International
DEAL VALUE
Refractory manufacturer IFGL Re- CUSC provides ancillary services
fractories has acquired two US-based including processing of raw materi- $ 13 Million
firms EI Ceramics and CUSC Inter- als, warehousing and packaging to EI
national for $13 million (about Rs 59 Ceramics.
DEAL
crore), to build a presence in one of
NATURE
the world’s largest markets for steel. As per the agreement with EI Ceram-
Refractory materials are used in lin- ics and CUSC, the day-to-day opera- Acquisition
ings for furnaces, kilns, incinerators tions of the two companies will con-
PURPOSE
and reactors. They are also used to tinue to be looked after by the current
make crucibles. team and several key employees The two firms will
drawn from the two companies. Jim play a pivotal role in
Purpose of the Acquisition: McIntosh, who has experience in others expansion plans
The acquisition is meant for IFGL to technical marketing and commercial specifically in North
strengthen its business foothold in aspects of the industry, will continue America and Mexico
US. The two firms will play a pivotal as president.
role in others expansion plans.
CUSC also owns about 2.74 acres of They intend to use their network to FACT
arlier
land with a built-in warehouse, sell in South America including Bra- IFGL had e isi-
cqu
which comes as an added advantage. zil and Argentina. Existing customers made two a e —
r op
of IFGL in the US, Canada and Mex- tions in Eu rna-
te
About the Parties ico will have access to EI Ceramics’ Monocon In ies in
a cto r
EI Ceramics designs, manufactures high performance products. Post ac- tional Refr ffmann
o
and supplies alumina graphite con- quisition, IFGL plans to enhance the 2005 and H 008.
in 2
Ceramics
tinuous casting refractories to several capacity utilization of the two com-
steelmakers in North America, while panies over two years.

A bank is a place where they lend you an umbrella in fair weather

and ask for it back when it begins to rain.- Robert Frost

7
V OLUME II P AGE 8

RPG Group's KEC International to buy

US-based SAE Towers for $95 million
KEC is one of the world's largest power transmission engineer-
ing, procurement and construction companies.

DATE September 7th, 2010

ACQUIRER KEC International, India
ACQUIREE SAE Towers Holdings LLC, US
DEAL VALUE $ 95 Million
DEAL NATURE Acquisition
PURPOSE US has a huge opportunity as valuations are good and
the business is flat

KEC International Limited is set to mission as well as related hardware.

buy SAE Towers Holdings LLC (SAE
Towers) for $95 Million from Wash-
FACT ington-based private equity
firm ACON Investments.
RPG Group Company
is a dominant player
The transaction is expected to close in
in T&D and telecom
infrastructure and is September 2010, subject to regulatory
now eyeing the huge approvals and customary closing con-
business potential in ditions.
railway infrastructure,
where it is already This acquisition will strengthen
present in the electrifi- KEC’s global leadership position in
cation segment, hav-
the large and growing markets of
ing electrified 5,000-
kilometres of the In- North America and Latin America.
dian railways. SAE Towers has a significant pres-
ence in geographic areas which are of
substantial interest to KEC.
SAE Towers currently has over 750
employees.
SAE Towers’ management team and
employees will continue with the
Company. SAE Towers is a limited
liability company incorporated in
Delaware, USA along with its operat-
ing subsidiary companies in Brazil,
Mexico and the USA. It has manufac-
turing facilities in Brazil and Mexico
and a tower test station at Brazil. KEC
has five strategic business units look-
ing at Power transmission project,
power distribution and substation pro-
jects, cables, telecom and railways
contracts.

Headquartered in Houston, Texas, KEC is bidding for BOOT and

SAE Towers is the manufacturer of
steel lattice transmission towers in US
with annual production capacity of
100,000 metric tons. It also manufac-
tures steel poles for electrical trans-
BOOM projects in India. Currently it
is participating in most of the trans-
mission infrastructure project in JV
with its partners. .

It's not the employer who pays the wages. Employers only handle the money.
It's the customer who pays the wages.– Henry Ford

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P AGE 9

CROSSWORD
THE WORD POWER

By Ashim, Anish and Shweta

Across Down
3. Nokia will complete the acquisition of this US
1. A bank's agreement with a company attempt-
based firm in 3rd quarter of 2010 to boost mo-
ing a takeover not to finance any other poten-
bile software offerings to developers and pub-
tial acquirer's bid. (8)
lishers. (7)
2. BK Birla Groups cement arm and timber has
4. Malaysia-based Astro All Asia Networks will
been merged through a swap deal, what was
acquire 49% stake for $40 million (about Rs.
the name of the cement arm? (8)
182 crores) in these media firm lifestyle unit
(4)
6. An Indian firm has acquired this firm after
three year of legal battle with the target firm
5. Trading based on a rumour of a takeover. (10)
to increase foothold in US market. (4)
8. These US based pharma giant planning to buy
7. An arrangement in which sellers of a business
FoldRx, based in Cambridge, Massachusetts
receive additional future payment, usually
in an undisclosed amount. (6)
based on future earnings. (7)
9. This Indian logistics firm is planning to acquire
8. A Japanese company, Taisho pharmaceutical,
Star Distribution Logistics by acquiring 40%
is planning to acquire this Ahmadabad based
share along with 20% open offer in a strategic
pharma company. (5)
acquisition step (4)

If money be not thy servant, it will be thy master. The covetous man cannot so properly be said to pos-
sess wealth, as that may be said to possess him– Francis Bacon

9
 CASE STUDY
Caliphate the second!
A Case Study on the drawn, no surprise merger of
Hewlett Packard and Compaq
By Puneet Singh
About the two companies

HP
The company has been prospering ever since as its profits grew from five and half million dollars in
1951 to about 3 billion dollars in 1981. The pace of growth knew no bounds as HP's net revenue
went up to 42 billion dollars in 1997. Starting with manufacturing audio oscillators, the company
made its first computer in the year 1966 and it was by 1972 that it introduced the concept of personal
computing by a calculator first which was further advanced into a personal computer in the year
1980. The company is also known for the laser-printer which it introduced in the year 1985.

Compaq
The name of the company had come from-"Compatibility and Quality". The company introduced its
first computer in the year 1983 after at a price of 2995 dollars. In spite of being portable, the problem
with the computer was that it seemed to be a suitcase. Nevertheless, there were huge commercial
benefits from the computer as it sold more than 53,000 units in the first year with a revenue genera-
tion of 111 million dollars.

The Instigation
Carly Fiorina, who became the CEO of HP in the year 1999, had a key role to play in the merger that
took place in 2001. She was the first woman to have taken over as CEO of such a big company and
the first outsider too. She worked very efficiently as she travelled more than 250,000 miles in the
first year as a CEO. Her basic aim was to modernize the culture of operation of HP. She laid great
emphasis on the profitable sides of the business. This shows that she was very extravagant in her ap-
proach as a CEO.

Ultimately, the company had to certainly plan out something different. So, it was decided that the
company would be acquiring Compaq in a stock transaction whose net worth was 25 billion dollars.
Initially, this merger was not planned. It took two months for further studies and by September,
2001, the boards of the two companies approved of the merger. In spite of the decision coming from
the CEO of HP, the merger was strongly opposed in the company. The two CEOs believed that the
only way to fight the growing competition in terms of prices was to have a merger. But the investors
and the other stakeholders thought that the company would never be able to have the loyalty of the
Compaq customers, if products are sold with an HP logo on it. Other than this, there were questions
on the synchronization of the organization's members with each other. This was because of the
change in the organization culture as well.

10
Advantages:

Marketing
Hp and Compaq would now have common channels as far as their buying is concerned. So, the benefits
in this concern is that even for those materials which were initially of high cost for HP would now be
available at a cheaper price.

Operations
The foremost advantage in this area is that in the location of raw material. Even the processing style
would be same making the products and services synchronized with the ideas and also in making a de-
cent operational strategy.

Technology
The technological strategy of the merged company would promote highly economical functioning. This
can be done through a common research and development and designing team.

HP would now have to ensure another fact that with this merger they would be able to prove competi-
tors to the present target and those of competitors like IBM as well. Even the operations and the output
market needs to be above what exists at present. The company needs to ensure that the corporate strat-
egy that it uses is efficient enough to help such a future. The degree of diversification needs to be man-
aged thoroughly as well.

1.
CATECHIZE THE QUESTION MARKS

1. Which mega merger created the world's first 'clicks and mortar' company?

2. RIL , RPL merger created a mega company worth?

3.Australian company Expert Info merged with which Indian firm?

4.Which merger will create the world's 5th largest brewer?

5. Which of the two airline arch rivals are planning a merger?

QUIZ

6. What is the aggregate value of a company?

7. Which evaluation is used by private equity firms to evaluate an acqusition?

8. What does not cause a dip in the acquirer’s market value?

9. What are Collars in Mergers and Acquisitions?

10. What is a sensitivity table?

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 CROSSWORD SOLUTION

1. America Online and Time Warner.

2. $11 billion QUIZ
3. Infosys
4. Coors and Molson
ANSWERS
5. Air New Zealand and Qantas
6. Total Enterprise Value
7. LBO model
8. A 60:40 cash-share/credit acquisition
9. They are the lower and upper bands that evaluate the movement of the stock during the entire
activity
10. It is created to understand the shifts and variations in the EPS, consideration and the PE Ratio

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 INSPIRED BY
Prof. Anirban Ghatak
(Christ University Institute of Management, Kengeri, Bangalore)

Sincere acknowledgment of the efforts of all the contributors for

their knowledge filled articles, crossword and quiz

ABOUT SYMBIONT
Symbionts are organisms which come together for mutual benefit, just
like companies go for Mergers & Acquisitions.

SYMBIONT is a monthly newsletter dedicated exclusively to Mergers &

Acquisitions. SYMBIONT also has an online forum for related discus-
sions. The newsletter has always aimed to enlighten the readers about
the current happenings in the M&A circuit along with interesting add ons
like crosswords, terminologies, brain teasers and many more.

For any suggestions, reviews or queries, kindly drop in at symbiont.newsletter@gmail.com

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