Market Judges the right Bidder also Bell Atlantic made an offer to acquire Air Touch at price of $73

per share, which was 7% premium above Air touchs closing stock of $68 per share. However Bell Atlantics market price fell immediately by 5%, reflecting that the market didnt like the deal. A week after this, Vodafone made the counter offer to acquire Air Touch at $97, which was 33% more than the Bell Atlantics offer of $73 offer. However, Vodafones stock during the offer discussion went up by 14% reflecting that the market liked the idea. This means that market foresighted Vodafone generating a higher synergy than what Bell Atlantic would achieve. In January 1997 Starwood Lodge made an offer of $85 per share for ITT that was almost 100 % premium over ITTs existing share price. Under the terms of the offer, Starwood gave the shareholders a choice of either all in cash or all in stock. However if more than shareholders choose for all cash payout then the cash payout to these shareholders would be capped at $25.5 and the balance would be paid in Starwood stock. When the ITTs board chose the offer, almost 75% of the shareholders chose the cash option resulting in trigger of the $27.5 cap. As a result of accepting the offer, ITTs shareholders ended up holding 67% of the combined companys stock. The price of the stock which was trading t $55 during the deal plunged sharply after the deal. After one year it was trading at $32 per share and all the gains from the deal for the existing shareholders of ITT were wiped off.

A Stock Deal: The ICICI Merger with Bank Of Madurai ICICI Bank, a large private sector bank (a strong bank) took over Bank of Madura (relatively less strong bank) in order to expand its customer base and branch network. When we look at the key parameters such as net worth, total deposits, advances and NPAs the ICICI Bank is in a much better position. The net worth of the former is four folds higher than the latter. And in terms of total deposits and advances the former is three fold higher than the latter. The ICICI Bank which was looking for a strategic alliance after it received its proceeds from ADS issue, had a tie up with BOM only to expand its customer base and branch network. ICICI Bank announced a merger with the 57-year-old Bank of Madura(BOM), with 263 branches, out of which 82 were in rural areas, with most of them in southern India, as on the day of announcement of merger (09-12-00). The merger gave ICICI Bank a hold on South Indian market, which has high rate of economic development. The swap ratio was approved in the ratio of 1:2 two shares of ICICI Bank for every one share of BOM. The deal with BOM diluted the equity capital by around 12 percent. And the merger brought 20 percent gains in EPS of ICICI Bank. And also the banks comfortable Capital Adequacy Ratio (CAR) of 19.64 percent declined to 17.6 percent. For sure, the stock merger brought cheer to shareholders and bank employees of BOM, and some amount of discomfort and anxiety to those of ICICI Bank. But as we see, all the parties involved in the deal ended up gaining due to the positive market reaction to this deal. The scheme of amalgamation increased the equity base of ICICI Bank to Rs. 220.36 cr. ICICI Bank issued 235.4 lakh shares of Rs.10 each to the share-holders of BOM. The merged entity had an increase of asset base over Rs.160 bn and a deposit base of Rs.131 bn. The merged entity would have 360 branches and a similar number of ATMs across the country and would also enable the ICICI to serve a large customer base of 1.2 million customers of BOM through a wider network, adding to the customer base to 2.7 million. These risk of these synergies not working out, seemed to be very low for the market.

A Cash Deal: Gujrat Ambuja aquired DLF Gujarat Ambuja Cements (GACL) on December 14, 1999 said it was taking over the loss-making DLF Cement(DLF had incurred a loss of Rs 122 crore during 1998-99 on an equity of Rs 213 crore.) for Rs 142 crore in a 3-phase all cash deal as follows: 31% equity i.e 6.5 crore Equity Shares at Rs 12.65 per share = Rs 81.31 crore. 20% proposed Open Offer i.e 4 crore Equity Shares at Rs 13.85( 9.5% premium)per share = Rs 60 crore. Preferential allotment of 15 crore shares at Rs 13.85 per share = Rs 207.75 crore. These amounts aggregate to Rs 350 crore approximately. The acquisition of the 1.5 million tonne plant in Rajasthan would take the installed capacity of GACL to 9 million tonnes.. Further, Gujarat Ambuja's infusion of Rs 208 crore worth of preferential equity into DLF cement was expected to help halve DLF Cement's debt-equity ratio from its current 1.5:1. The market didnt seem to be very optimistic about the deal right from the beginning. It seemed like DLF had nothing special to offer to GACL. The market valued the expected synergies from the merger to be much lower than the premium paid.