Deal or no deal

The Jet-Sahara deal's death brings to mind other M&A deals' untimely demise. There were several M&A deals in the past too that fell through and the root cause varies from valuation disagreements to scandals. Moneycontrol tracks some of the celebrated events when big ticket M&A activity was announced and the various reasons that led to their subsequent death.

Talk of the town

In the year 2000, Sterlite Industries attempted to buyout Indian Aluminium . The attempt failed. Hindalco stepped in next with an offer of Rs 190 per share, which was at a premium of Rs 70 over Indal's market price on 23 March 2000, and took over Indian Aluminium, India's market leader in value-added aluminium. Hindalco paid Indal's parent, Alcan of Canada, Rs 738 crore for its 54.6 per cent stake in Indal.

 

Hindalco on its part had lost the opportunity to take over India Foils Ltd in 1999, which was acquired by Sterlite Industries.

In 2005, the managements of Federal Bank and Lord Krishna Bank decided to call off the merger of the two banks as they could not agree on the issue of valuation. There was considerable disparity on the valuations of the two banks that could not be bridged.

The January 2005, GTB-UTI merger announcement and subsequent calling off the deal generated enough interest among the investors and media alike. It was said to create the biggest private sector bank, overtaking HDFC Bank and ICICI Bank . However, a series of allegations followed relating to price rigging in the GTB stock following the merger announcement. Amid allegations of share price manipulation, promoters of the bank went in for a second valuation by Deloitte Haskin Sells (DHS), which also recommended the same swap ratio of nine share of UTI Bank to four shares of GTB. But the situation got messy and in a board meeting GTB decided to opt out of the merger on grounds that it would be uncomfortable working with UTI Bank in the light of allegations of price manipulation.

In June 2005, Matrix Laboratories  and Stride Arcolabs  announced that they will merge to create a combined entity called Matrix Strides. The merger was to create a significant generic company based out of India with worldwide operations. But next month, that is July 23, 2005 Matrix Laboratories Limited and Strides Arcolab Limited announced that the proposed merger, which was approved in principle by the Board of Directors of both the companies at their meetings on 1st Jun 2005, has been called off. The reason was once again disagreement over valuation.

No decision yet

Union Bank - Bank of India merger was supposed to have taken place. But so far no offcial reason has been given for the merger not taking place. Similarly the merger of all State Bank subsidiaries under one roof too has remained a non-starter. However, these are PSUs and hence subject to government decision-making.

The proposed merger of telecom giants Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd has been put on the backburner mainly because of complex labour issues affecting around 400,000 employees of the two corporations. While BSNL is fully owned by the government, MTNL is a listed company. The capital structure of both the companies are different. Although, in 2005 December, it was said that the government plans to consider the issue of merger once gain on the basis of suggestions made by a financial consultant appointed by the Centre.