Merger &

Acquisitio
n
Assignment
2010-2011

Ankur
Dubey
Reg.No. PGPM/0911/023

INTERNATIONAL ACADEMY
OF MANAGEMENT &
ENTREPRENEURSHIP
Content………….

Question 1- Write a note on the acquisitions

driven growth of Thomson Corporation (Now
known as Thomson Reuters)
Question 2- Write a note on Corus acquisition
by Tata Steel
Question 3- What do you understand by
spinoffs, Explain in detail the Carefusion’s
spinoff from Cardinal.
Question 4- Explain in detail equity carve out of
Mead Johnson.
Question 5- Explain tender offer by Sonosite
Inc.
Question 6- Explain Microsoft Corporation’s
share repurchase program.
Question 1:-Write a note on the acquisition
driven growth of Thomson Corporation. (Now
known as Thomson Reuters)

Recent acquisitions: Trade Web, the bond-trading network, and

CCBN, a webcasting provider, accounted for much of the increase.
Thomson Corporation has closed or announced acquisitions totaling $1.5
bn so far this year. The group said this level of acquisition activity would
not be sustained for the rest of this year and would slow in 2005.
Thomson Financial's core Thomson One systems grew 12% in the third
quarter. Revenues for Thomson Corporation grew 9% to $2.22bn.

The M&A market cycle will also swing to smaller deals. With both
stock and M&A market valuations down, deals involving larger
corporations are more likely driven by restructuring sellers versus
acquirers pursuing corporate development. In addition to restructuring,
activity in the middle market will also be driven by the life cycle needs of
aging entrepreneurs and private equity limited partnerships, both of
whom will face increasing pressure to create a more liquid equity
investment.

Conventional wisdom suggests that valuations are down and sellers

will not be motivated until there is an alignment of market values with
their intrinsic value. This is typically true at the onset of a cyclical
downturn but as noted above, the pressure of weakened financial
performance or non-economic life cycle considerations begin to mount.
Credit market conditions will compel weakened firms to seek suitors at
attractive acquisition prices. As the duration of the cycle becomes more
apparent, life cycle sellers will be influenced to consider more creative
ways of structuring deals to bridge the gap between market and intrinsic
valuations.

Question 2:-Write a note on Corus acquisition by

TATA Steel.
 On 20 October 2006 the board of directors of Anglo-Dutch steelmaker Corus accepted
a $7.6 billion takeover bid from Tata Steel, the Indian steel company. The following months
saw a lot of negotiations from both sides of the deal. Tata Steel's bid to acquire Corus Group
was challenged by CSN, the Brazilian steel maker. Finally , on January 30, 2007, Tata Steel
purchased a 100% stake in the Corus Group at 608 pence per share in an all cash deal,
cumulatively valued at USD 12.04 Billion. The deal is the largest Indian takeover of a foreign
company and made Tata Steel the world's fifth-largest steel group.

Synergies between the two companies

There were a lot of apparent synergies between Tata Steel which was a low cost steel
producer in fast developing region of the world and Corus which was a high value product
manufacturer in the region of the world demanding value products. Some of the prominent
synergies that could arise from the deal were as follows :
• Tata was one of the lowest cost steel producers in the world and had self sufficiency
in raw material. Corus was fighting to keep its productions costs under control and
was on the look out for sources of iron ore.
• Tata had a strong retail and distribution network in India and SE Asia. This would
give the European manufacturer a in-road into the emerging Asian markets. Tata was
a major supplier to the Indian auto industry and the demand for value added steel
products was growing in this market. Hence there would be a powerful combination
of high quality developed and low cost high growth markets
• There would be technology transfer and cross-fertilization of R&D capabilities
between the two companies that specialized in different areas of the value chain.

Timelines
• On October 20, 2006, Tata Steel announced that it had agreed to pick up a 100% stake
in the Anglo-Dutch steel maker Corus at 455 pence per share in an all cash deal,
cumulatively valued at GBP 4.3 billion (USD 8.04 billion).
• On November 19 2006, the Brazilian steel company CSN launched a counter offer for
Corus at 475 pence per share, valuing it at $8.4 billion.
• On December 11 2006, Tata preemptively upped the offer to 500 pence, which was
within hours trumped by CSN's offer of 515 pence per share, valuing the deal at $ 9.6
Billion. The Corus board promptly recommended both the revised offers to its
shareholders.
• On December 11, 2006, CSN announced a formal offer for the Company at an offer
price of 515 pence per Corus Share , valuing the deal at $ 9.6 Billion.. The CSN
Acquisition would also be implemented by way of a scheme of arrangement and is
subject to a pre-condition that either Corus Shareholders reject the Tata Scheme or the
Tata Scheme is otherwise withdrawn by Corus or lapses. The Corus board promptly
recommended both the revised offers to its shareholders.
 • Also on December 19, 2006, UK Watchdog the Panel on Takeovers and Mergers
announced that the last date for each of Tata and CSN to announce revised offers for
the Company, should they wish to do so, is 30 January 2007. They also warned that it
would begin an auction procedure if the two remained in competition.
• On January 31 2007 Tata Steel won their bid for Corus after offering 608 pence per
share, valuing Corus at $11.3bn.

Final-Structure
• $3.5–3.8bn infusion from Tata Steel ($2bn as its equity contribution, $1.5–1.8bn
through a bridge loan)
• $5.6bn through a LBO ($3.05bn through senior term loan, $2.6bn through high yield
loan)

Tata Corus Deal will benefit Tata Steel

Nine round of auctions, four months of transition and around $12.1 billion fetched a
neo Tata Steel. Tata Steel now is the fifth largest steel company from fifty sixth initially with
an annual production of around 24 million tonnes from around 6 million tones previously.
The rise in turnovers of the new entity will bring Tata steel in the fortune 500 list as well.
Tata steel acquired Anglo-Dutch steel major Corus plc in a deal of $12.1 billion or �6.2
billion at 608 pence per share. This acquisition process began in October last year with a
price of 455 pence per share and a price of around $8 billion. The deal finally materialized
after lot of competition from Brazilian Steel maker CSN. In the ninth round of auction CSN's
603 pence per share was outbid by Tata steel's 608 pence per share.

Corus' well known strength is the production of high-end steel-used in construction

automobile and aircraft as well as its impressive research and development will complement
Tata Steel. The merger will also give it access to the important markets of Europe. All that
will benefit Corus is the management expertise of the Tatas and their cost advantage in
producing steel. With their acumen they will bring down the production cost of Corus. Tata
Steel expects to earn $300 million per year through cost savings.

Market has not responded well to this deal as the price of the stocks fell. Investors are
worried about cash outflow and the resultant strain on company's balance sheet. Of the total
cash to be paid in the deal $4.1 billion will be forked by Tata steel, rest of the money will be
as debts and will be returned from Corus cash flows.

Question 3:-What do you understand by Spin-

offs. Explain in detail the Care-fusion spin-off
from cardinal.

A spin-out refers to a type of spin-off where a company "splits off"

sections of itself as a separate business. The common definition of spin-
out is when a division of a company or organization becomes an
independent business. The "spin-out" company takes assets, intellectual
property, technology, and/or existing products from the parent
organization.

Cardinal Health, Inc., is a health care services company based in

Dublin, Ohio. It is currently ranked 17th on the Fortune 500. Cardinal
Health specializes in health care supply chain services, providing
pharmaceuticals and medical products to more than 40,000 locations
each day. The company is also a manufacturer of medical and surgical
products, including gloves, surgical apparel and fluid management
products. In addition, the company supports the growing diagnostic
industry by supplying medical products to clinical laboratories and
operating the nation’s largest network of radio pharmacies that dispense
products to aid in the early diagnosis and treatment of disease.

Under a Plan of Distribution adopted by Cardinal, the Internet bank

will be spun-off to Cardinal's shareholders. At the time of the spin-off, the
bank, to be known as Security First Network Bank, FSB (SFNB), will
operate from a single office in Pineville, Ky., and will have total assets of
approximately $41 million and stockholders' equity of approximately $2
million.

In most cases, the parent company or organization offers support

doing one or more of the following: investing equity in the new firm, being
the first customer of the spin-out (helps to create cash flow), providing
incubation space (desk, chairs, phones, internet access, etc.) or providing
services such as legal, finance, technology, etc. Cardinal Health today
announced it has completed the spinoff of CareFusion Corp. (NYSE: CFN)
through a pro rata distribution of approximately 81 percent of the shares
of CareFusion common stock, effectively launching it as an independent,
publicly traded company. After the close of business, Cardinal Health
distributed 0.5 share of CareFusion common stock for each outstanding
share of Cardinal Health common stock held as of market close on Aug.
25, the record date for the distribution. Approximately 222 million shares
of CareFusion common stock were outstanding as of the distribution,
including certain equity awards issued in the spinoff. Approximately 180
million shares were distributed to Cardinal Health shareholders of record
as of Aug. 25, and approximately 41 million shares were retained by
Cardinal Health, which it will divest within five years. CareFusion common
stock will begin regular way trading today on the New York Stock
Exchange under ticker symbol “CFN.”

Additionally, the appointment of George S. Barrett as chairman and

chief executive officer of Cardinal Health became effective upon
completion of the spinoff on Aug. 31. The resignations of Philip Francis,
Michael Losh and Michael O’Halleran from the Cardinal Health board of
directors were also effective upon completion of the spinoff, with all three
transitioning to the board of directors of CareFusion in connection with the
spinoff. As previously announced, the new Cardinal Health board will
consist of 10 members, including two new directors, Bruce L. Downey,
effective yesterday and Glenn A. Britt, effective Oct. 1.

“The completion of the CareFusion spinoff marks a new day for

Cardinal Health,” Barrett said. “We are focused on our role in helping
make health care more cost-effective and our commitment to improving
shareholder value.” Cardinal Health is expected to benefit from enhanced
management focus and sharper strategic vision, as well as improved
opportunities to make investments in growth areas. In addition, the
spinoff is expected to improve the alignment of management and
employee incentives with performance and growth objectives at the
company. The completion of the spinoff also allows Cardinal Health to
adopt the capital structure, investment policy and dividend policy best
suited to the financial profile and needs of the business.

Under a Plan of Distribution adopted by Cardinal, the Internet bank

will be spun-off to Cardinal's shareholders. At the time of the spin-off, the
bank, to be known as Security First Network Bank, FSB (SFNB), will
operate from a single office in Pineville, Ky., and will have total assets of
approximately $41 million and stockholders' equity of approximately $2
million.

Question 4:-Explain in detail equity carve-out of

Mead Johnson.

Investors starved for new product lapped up the stock of Mead

Johnson, the children's nutrition company, buying 5 million more than
originally estimated, and sending the stock soaring 10 percent in its debut
Wednesday.

"The Mead Johnson IPO showed that there are buyers out there
when they can find growth in a private company (that goes public), but
can't in a public company," said Scott Cutler, executive vice president of
listings for the Americas at New York Stock Exchange operator NYSE
Euronext Inc (NYX.N). But Mead Johnson, a profitable spin-off from
pharmaceutical giant Bristol Myers Squibb Co (BMY.N) known for its infant
formula Enfamil, was only one of four planned IPOs to succeed. The other
three did not go last week. On the positive side, Mead Johnson's IPO was
the second in a row to perform well. The other was last November's debut
by on-line university operator Grand Canyon Education Inc (LOPE.O),
which has risen 50 percent over its offer price.

The Mead Johnson IPO debuted at $26, at an 8.3 percent premium,

giving the stock a price-earnings multiple of about 12.9, compared with
11.24 for the S&P Personal Products Sub-Industry Index .GSPCOMS.
 Mead Johnson is the first stand-alone pediatric nutrition company to
go public. Its main competitors are Nestle SA (NESN.VX), Abbott
Laboratories (ABT.N) and Wyeth WYE.N.

One of Mead Johnson's biggest advantages was its status as a

profitable, growing spin-off of a multinational, so investors were familiar
with it. While the Mead Johnson deal is unlikely to blow the IPO doors wide
open, it could open them up a bit for other spin-offs in the pipeline
because of the familiarity and liquidity that larger deals offer, analysts
said. What's more, Mead Johnson was the first carve-out since EMC Corp
(EMC.N) spun off virtualization software maker VMWare Inc (VMW.N) in a
$1.1 billion IPO in August 2007.

"Mead Johnson outlined the criteria for a successful spin-off. A

company has to have positive cash flow, pay a dividend and have a
brand," Gaskins said.

Question 5:-Explain tender offer by Sonosite Inc.

SonoSite, Inc. is the innovator and world leader in hand-carried

ultrasound. Headquartered near Seattle, the company is represented by
ten subsidiaries and a global distribution network in over 100 countries.
SonoSite’s small, lightweight systems are expanding the use of ultrasound
across the clinical spectrum by cost-effectively bringing high performance
ultrasound to the point of patient care.

SonoSite shareholders have the opportunity to tender some or all of

their shares at a price within the range of $26.10 to $30.00 per share.
Based on the number of shares tendered and the prices specified by the
tendering shareholders, SonoSite will determine the lowest per share price
within the range that will enable it to buy $100 million in shares, or such
lesser number of shares that are properly tendered. All shares accepted
for payment will be paid the same price, regardless of whether a
shareholder tendered such shares at a lower price within the range. At the
minimum price of $26.10 per share, SonoSite would repurchase a
maximum of 3,831,417 shares, which represents approximately 22% of
SonoSite’s currently outstanding common stock. SonoSite will fund the
repurchase from available cash on hand. The low and high ends of the
price range represent approximately a 0% and 15% premium,
respectively, to the share closing price for our common stock on January
8, 2010, which was the trading day immediately preceding the original
announcement of the proposed tender offer.
The tender offer will expire at 5:00 p.m., New York City time, on Friday,
February 19, 2010, unless extended by SonoSite. Tenders of shares must
be made on or prior to the expiration of the tender offer and may be
withdrawn at any time on or prior to the expiration of the tender offer. The
tender offer is subject to various terms and conditions described in offer
materials that were publicly filed and distributed to shareholders today.
Additional copies of the offer materials will also be available from the
Information Agent, Georgeson Inc. The Dealer Manager for the tender
offer is J.P. Morgan Securities Inc.

Neither SonoSite’s management, nor any of its board of directors,

executive officers, the Dealer Manager, the Information Agent or the
depositary is making any recommendation to shareholders as to whether
to tender or refrain from tendering their shares in the tender offer or at
which price or prices to tender their shares. The company’s executive
officers, senior management and directors have advised the company that
they do not intend to tender any of their shares in the tender offer.
Shareholders must decide how many shares they will tender, if any, and
the price or prices within the stated range at which they will tender their
shares. Shareholders should consult their financial and tax advisors in
making this decision.

This press release is for information purposes only, and is not an offer to
purchase or the solicitation of an offer to sell any shares of SonoSite
common stock. The solicitation of offers to purchase shares of SonoSite
common stock will be made only pursuant to the tender offer documents,
including an Offer to Purchase and related Letter of Transmittal that will
be distributed to shareholders and filed with the Securities and Exchange
Commission shortly.

Question6:-Explain Microsoft Corporation’s share

repurchase programme.
Microsoft chief financial officer Chris Liddell said in a statement: "With our
share repurchase programmes announcement today, we reaffirm our
confidence and optimism in the long-term future of the company and
continue to execute on our strategy of returning capital to shareholders."

Microsoft on Thursday reported profits that were just ahead of analysts'

expectations, as the company announced a plan to buy back as much as
an extra $40bn worth of its stock.

The software maker said it would buy back $20bn through a tender offer
set to be completed on 17 August. The company said its board of directors
has also authorised the company to buy back up to $20bn worth of stock
through June 2011. The company said it has completed the $30bn stock
buyback announced two years ago

For its tender offer, Microsoft is using what is known as a modified Dutch
auction, in which those who want to sell shares can indicate how many
shares they want to sell and at what price. Microsoft said it will pay no
more than $24.75 per share and not less than $22.50. The buyback offer,
which is expected to begin today and run through 17 August, could see
the software maker repurchase up to 808 million shares, or about 8.1 per
cent of all outstanding shares.

On the profits front, the software maker said it earned $2.3bn, or 28 cents
per share, on revenue of $11.8bn, for the three months that ended 30
June. That compares with profits of $3.7bn, or 34 cents per share, on
revenue of $10.2bn for the same quarter a year ago.

The past quarter's results included legal charges that dented profits by 3
cents per share. Excluding the charge, the profits were a penny better
than the 30 cents per share expected by Wall Street analysts and
forecasted by the company in April. However, that outlook was a shock to
analysts and investors, as Microsoft detailed plans to spend more to
better compete against Google, among other things.Microsoft's sales
growth for the past quarter was its highest in two years

Microsoft said it grew its staffing ranks 16 per cent overall, as it boosted
development for both Windows and its online MSN and Windows Live
businesses. It spent $197m on increased research and development for its
Live services and for online advertising, and its Windows Client unit saw
its workforce grow 13 per cent, a rise largely connected with efforts
around Windows Vista.Microsoft's revenue forecast for the coming quarter
was below what some analysts were looking for. Microsoft's Liddell said on
a conference call with analysts: "PC growth, while still healthy, is slowing."
He forecast PC unit growth of nine per cent to 11 per cent for the first
quarter, and eight per cent to 10 per cent for the year.

Healy did say Microsoft's balance of unearned revenue - money taken in

for purchases accounted for in future quarters - rose to $10.9bn, "which
really does speak well around customer excitement about the next
version of Windows and Office," he said. What is less clear, of course, is
when those products will come. Microsoft has said to expect Windows
Vista in January, though many analysts are sceptical the operating system
will be ready by then. Development work on Office 2007, meanwhile, had
been slated to be wrapped up by October but has been pushed out to the
year end, casting doubt on its prospects for a January launch. Liddell
added: "We have our share of execution risks in the next year."

For the current quarter, Microsoft said to expect revenue in the range of
$10.6bn to $10.8bn, with per-share profits between 30 cents and 32
cents. Analysts were expecting revenue of $10.9bn and per-share profits
of 31 cents. Microsoft said to expect revenue between $49.7bn and
$50.7bn and diluted profits per share somewhere between $1.43 and
$1.47. Included in that outlook is significant spending, such as $450m in
product launch and marketing costs when Microsoft updates its two
flagship products, Windows and Office. Another $450m is earmarked for
growth in sales force and general marketing, plus $1bn for development
of "high-growth products and new products and services". Another $500m
will go to online services investments, including its AdCenter, ad-serving
tool, its search engine, Office Live, Live.com and its CRM Live service

Microsoft has also been continuing a companywide re-organization that

began last September. Earlier this week, the company said it would shift
from reporting financial results for seven to five business units, combining
the results of its two smallest units with other businesses.

Word of the profits report and big buyback sent Microsoft's stock higher in
after-hours trading. Shares changed hands recently at $24.17, up $1.32,
or 5.8 per cent, from the close of regular trading. Ahead of the report,
Microsoft closed at $22.85, a drop of 55 cents, or more than two per
cent.