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Cases

Hindalco Novelis Merger

One of the biggest mergers in the aluminium industry took place

 between Hindalco and Novelis. This deal made Hindalco one of the

leading players in the global aluminium industry. The deal inclusive

of all debts was valued approximately at 6 billion US dollars. The

 benefits to Hindalco from this deal were increase in its global

 presence and access to the most advanced technology in the industry.

The important aspects of the agreement that was signed on 10th

 

feb,2007 between Hindalco and Novelis are –  

  The deal was values at approximately 6 billion US dollars.

  This amount was inclusive of all debt.

  Each share of Novelis was valued at 44.93 US dollars. 

This deal made Hindalco a very strong player in the global aluminium

market. The milestones reached by Hindalco through this deal were -

  Hindalco became the largest aluminium rolling company in the

world.

  The deal made Hindalco one of Asia's largest producers of

 primary aluminium.

  It also made Hindalco India's largest copper producer.

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STRATEGIC RATIONALE FOR ACQUISITION

This acquisition was a very good strategic move from Hindalco.

Hindalco will be able to ship primary aluminium from India and make

value-added products.'' The combination of Hindalco and Novelis

establishes an integrated producer with low-cost alumina and

aluminium facilities combined with high-end rolling capabilities and a

global footprint. Hindalco’s rationale for the acquisition is increasing

scale of operation, entry into high end downstream market and

enhancing global presence.

 Novelis is the global leader (in terms of volume) in rolled products

with annual production capacity of 2.8 million tonnes and a market

share of 19 per cent. It has presence in 11 countries and providessheets and foils to automotive and transportation, beverage and food

 packaging, construction and industrial, and printing markets.

Hindalco’s rationale for the acquisition is increasing scale of

operation, entry into high — end downstream market and enhancing

global presence. Acquiring Novelis will provide Aditya Birla Group's

Hindalco with access to customers such as General Motors Corp. and

Coca-Cola Co. Indian companies, fueled by accelerating domestic

growth, are seeking acquisitions overseas to add production capacity

and find markets for their products

``This acquisition gives Hindalco access to higher-end products but

also to superior technology,''

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Case2

TATA JLR Acquisition

In the past few years, the Tata group has led the growing appetite

among Indian companies to acquire businesses overseas in Europe,

the United States, Australia and Africa - some even several times

larger - in a bid to consolidate operations and emerge as the new age

Tata Motors is India’s largest automobile company, with

multinationals. revenues of $7.2 billion in 2006-07. With over 4

million Tata vehicles plying in India, it is the leader in commercial

vehicles and the second largest in passenger vehicles. 

Swot analysis

Strength

  Tata strong management capability and strong monetary base to

invest

  Acquisition will help TATA in competing with other brands.

  Improving risk profile of TATA diversification in different

market.

Weakness

  Inexperience in handling luxury automobile brand.

  Difficult to manage the work culture.

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Opportunity

  Rising demand for luxury automobiles in growing market like

India and china.

  Jaguar is good in technology, Engine, IT, Accounting. Complete

 product line with addition of luxury brand.

  Access into European and American market.

Threat

  Strong presence of competitors like Mercedes, BMW, lexus etc.

  Volatility in the market.

CASE 3

RIL and RPL

The RIL and RPL merger would result n India’s largest ever merger.

The merger enhance the value for shareholder of both the companies

This merger would unlock synergies from combined operations

likeCrude sourcing, Product placement, Supply Chain Optimization.

It provide Greater flexibility in operations planning Expansion of

refined product range.

Efficient utilization of combined cash flows integrated energy

companies consistently get higher valuations. RIL to enhance its

competitiveness in energy value chain

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Impact of Merger Proposal

RIL among top 10 private sector refining companies globally

It will own 2 of the world’s 3 largest, most complex modern

refineries.

It will  be the world’s largest producer  of ultra-clean fuels at a single

location.

Case 4

Procter and Gamble and Gillette

the case discusses the merger of Gillette with Procter and Gamble, the

two leading consumer goods companies. It describes the recent trends

and studies the ongoing consolidation in the consumer goods industry.

The case presents the rationale behind the decision to merge and the

 perceived synergies that both the companies can achieve from the

merger. It also discusses the possible threats to the merger including

cultural differences and various other issues.

Both the companies expected the merger to bring tremendous

synergies. According to Lafley, "This combination of two best-in-

class companies creates a stronger brand portfolio, opportunities for

even more innovation, faster sales growth, and cost savings." Analysts

felt that both scale and focus were important in this industry and P&G

had attempted to gain both with this acquisition.

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"P&G and Gillette can grow together at levels that neither could

sustain on its own. The reason is that consumer products is, in the

end, a scale business. The more scale a company can create, the more

opportunities there are to grow margins and invest in brand

innovation."

Concern issues:

The merger would result in around 6,000 job cuts equivalent to 4% of

the two companies' combined workforce of 140,000. Most of these

reductions would come from eliminating management overlaps and

consolidation of business support functions.

Product overlap would make it difficult to set the prices. There is a

strong overlap in toothbrushes and toothpaste.

Another fear was the P&G would face the risk of not being able to

concentrate on its functioning due to the demand of the integration

effect.

Suggestion

The firm should go with divestiture. They can start their own retail

outlets for their products. The more scale a company can create, the

more opportunities there are to grow margins and invest in brand

innovation.