M&A Critique August 2020 Issue

As we enter the 5th month since we as a nation were affected by this non-discriminatory pandemic, everyone is trying to gaze into the future. Slowly but surely the businesses have started even with reduced strength and economy seems to be on the road to recovery with GST (Goods and Services Tax) collections, manufacturing PMI, fuel consumptions all reaching pre-covid levels. Going ahead, we need to realize that technology is going to affect all of us, and we need to be equipped better for facing such situations again in future. Both, manufacturing and service businesses will need to equip themselves with better communication tools and integrate business intelligence tools going ahead to help owners take better decisions. . . Growth in companies providing tech to education, financial services, manufacturing, and agriculture should fasten in the coming months and should lead to more M&A activity in these sectors. Going forward any business which does not adopt technology, one day some software company will start the same business. 

Mastek and Majesco has doing a lot of global restructuring of their insurance business in the past 20 odd years.  Recently Majesco USA which is the subsidiary of Majesco Limited, entered into merger agreement with Magic Mergers Sub Inc., a WoS of Magic Intermediate LLC both a part of ThomaBravo group. Shareholding of the Indian entity Majesco Ltd. and public shareholders of Majesco USA shall be getting cash on account of merger and their shares will stand cancelled. The question in front of Majesco Ltd., India would be deciding the way of rewarding its shareholders by way of dividend, capital reduction, buy back or open offer for delisting. 

EdTech industry is seeing a surge in number of customers during this pandemic with educational institutes to parents all relying increasingly on getting their student’s education going on. Investors too are writing cheques for fund-raising rounds done by EdTech companies. Unacademy, which started as a YouTube channel has ventured into affordable online training into 35 exam categories, has recently acquired 4 companies in its sector. PrepLadder, CodeChef, Mastree and Kreatryx’s online exam preparation tool were added to Unacademy’s group enable it to give better services to their users and acquire new users with new services. 

Delisting was not a smooth process for a company and taking that into account new delisting regulations under Regulation 16(A) were introduced last year. Ineos Stryolution India Ltd. is the first company to decide to delist their company under the new regulation and passed a resolution in September 2019 getting approval for delisting at fair value of ?419 per share. The open offer was given after a green light from the bourses in July at a price of ?480 per share but the price discovery by the market in the past year put a price of ?1,100/- per share, a major mismatch. But despite the option available to the promoters to give a counteroffer to get the required number of shares to qualify for delisting it rejected the offer thus delaying the delisting by at least one year. 

Mehta group has a direct and indirect holding in lot of companies with 2 companies listed viz. Gujarat Sidhee Cement Limited and Saurashtra Cement Limited. To streamline their holding in the company they have decided to merge the holding companies into GSCL and SCL which will result in direct holding in the listed companies. These schemes are part of its strategy to remove cross holdings started with  capital reduction in GSCL done in 2013 and merger of 5 subsidiaries of SCL in 2019. it seems next step may be merger of both operating companies  

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