The Finance Society, FMS Delhi

Presents

News Edge || Edition 1 June 2016

News Brief
Deal News
1) Microsoft to acquire LinkedIn for $26.2 Billion
Microsoft announced its largest ever acquisition with its decision to buy social networking and
enterprise network company, LinkedIn for $26.2 Bn
Microsoft offered $196 per share, thereby valuing LinkedIn at a premium of 49.5% over its
closing stock price on 10th of June 2016

Further Readings
http://www.livemint.com/Companies/IrhTKgNKjGQc4VOKaN5qAO/Microsoft-says-to-buy-Linkedin-for262-billion.html
http://www.bloomberg.com/news/articles/2016-06-13/microsoft-to-buy-linkedin-in-deal-valued-at-262-billion-ipe079k9

2) Monsanta rejects $62 Billion bid from Bayer Corp

American agrochemical company Monsanto rejected a $62 Bn takeover bid from German
pharma and chemical giant Bayer Corp
The offer valued Monsanto at $122 per share, which was at a premium of 37% to Monsantos
closing stock price on May 9 which translates to an LTM EBIDTA of 15.8x. Monsantos CEO
Hugh Grant stated that any offer below $135 per share would be difficult to accept for the
board

Further Readings
http://www.forbes.com/sites/antoinegara/2016/05/23/bayer-offers-to-buy-monsanto-for-62billion/#84614896bae5
http://www.bloomberg.com/news/articles/2016-05-23/germany-s-bayer-offers-62-billion-cash-toacquire-monsanto

3) Tata power to acquire Welspun Renewable Energy for an EV of $1.38 Billion

Tata Power announced its decision to buy Welspun Renewable Energys 1,140 MW assets for
an EV of $1.38 Bn, making it the largest acquisition ever in the Indian renewable sector
With this acquisition, Tata Powers renewable arm TPREL will become the largest renewable
power company in India with a total portfolio of 2,300 MW ranging from solar to wind assets

Further Readings
http://www.livemint.com/Companies/MQxhN6an16NLIbEA43Ej9L/Tata-Power-to-acquire-WelspunRenewables-in-countrys-larges.html
http://www.business-standard.com/article/companies/tata-power-s-welspun-deal-is-not-without-risks116061500033_1.html

4) GOI approves merger of SBI and its 5 associates, Mahila Bank

Cabinet gave its in-principal nod to SBIs proposal to merge its 5 subsidiaries as well as Bhartiya
Mahila Bank. The merger is expected to be closed in FY 2016-17

 The merged entity will have an asset base of Rs 37 trillion with 22,500 branches and 58,000
ATMs. It will have over 50 crore customers

Further Readings
http://www.business-standard.com/article/reuters/india-approves-sbi-takeover-of-units-govt-sourcesays-116061500484_1.html
http://www.business-standard.com/article/finance/sbi-merger-to-create-banking-powerhouse116061600037_1.html

PE/VC News
1) Uber, Didi get mammoth funding as taxi aggregator war intensifies

Worlds largest taxi-hailing company Uber raised a record $3.5 Bn funding from Saudi
Arabias Public investment fund, valuing the company at $62.5 Bn. With this latest
round of funding, Uber has raised more than $11 Bn so far.
Ubers rival Didi, Chinas largest cab aggregator, has raised $7.3 Bn from Apple, Alibaba
and Softbank in latest round of funding while General Motors committed funds to Lyft
cabs in January

Further Readings
http://www.bloomberg.com/news/articles/2016-06-02/no-uber-ipo-in-sight-after-3-5-billion-fromsaudi-arabia
http://www.marketwatch.com/story/the-drive-behind-uber-and-didis-odd-billions-2016-06-17

Market News
1) European Indices fall over fears of Brexit

As fresh concerns of Britains exit from the European Union loomed, the British stock
index FTSE 100 fell below the 6000 mark on 15th June for the first time since February
The fall wiped off about 100 billion pounds of market cap. from the top British listed
firms over a period of four trading days
Other European indices such as the CAC (French stock market index) and DAX (German
stock market index) also saw markets crash on the back of Brexit

Further Readings
http://www.bbc.com/news/business-36526008
http://www.telegraph.co.uk/business/2016/06/14/ftse-100-slides-towards-6000-and-pound-falls-asbrexit-fears-dri/
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Economic News
1) Wholesale and Retail Inflation show increase for the month of May

Retail inflation reached a 21 month high of 5.76% in May, while core inflation slowed
down to 4.7% from 4.9% in April. Wholesale inflation also rose to 0.79% marking the 2nd
consecutive rise after 17 months of fall
May CPI, which is higher than RBIs projection, is likely to make the central bank weary
when it comes to deciding on cutting down on the interest rates

Further Readings
http://economictimes.indiatimes.com/news/economy/indicators/at-21-month-high-may-cpidiminishes-rate-cut-hope-in-august/articleshow/52729395.cms
http://money.livemint.com/news/market/economy/market-pulse/wpi-inflation-rises-to-0-79-in-maydriven-by-higher-food-prices-462602.aspx

2) Reserve Bank of India keeps rates unchanged in midyear policy announcement

Reserve Bank of India kept key interest rates unchanged in its midyear monetary policy
with repo rate at 6.5% nor did they tinker with liquidity with cash reserve ratio (CRR)
unchanged at 4%
Analysts expect a further 50 bps cut in repo rates this year, but have stated zero or low
possibility of any CRR cut.

Further Readings
http://profit.ndtv.com/news/market/article-sensex-rises-after-rbi-keeps-rates-steady-1416402
http://money.livemint.com/news/market/economy/market-pulse/wpi-inflation-rises-to-0-79-in-maydriven-by-higher-food-prices-462602.aspx

3) BOJ and US Fed hold interest rates

Bank of Japan held its key interest rate at minus 0.1% and kept the annual target for
expanding the monetary base at $764 Bn
The Federal Open Market Committee declined to raise its interest rate target from the
current 0.5% amid job-growth and GDP growth concerns

Further Readings
http://www.bloomberg.com/news/articles/2016-06-16/boj-keeps-policy-unchanged-shifting-stimulusfocus-to-july
http://www.cnbc.com/2016/06/15/fed-leaves-rates-unchanged-in-june-meeting.html

4) Current Account Deficit sees sharp fall, on brink of turning into surplus

Indias Current Account Deficit fell sharply to $0.3 Bn or 0.1% of GDP in the fourth
quarter of fiscal year 2015-16 against $7.1 Bn in the third quarter of the same fiscal
The contraction was primarily on account of lower trade deficit, which stood at $24.8 Bn
against $31.6 Bn in the corresponding quarter a year ago. Remittances from Indians
abroad also fell to $15.7 Bn in the fourth quarter
For entire fiscal, CAD fell from 1.8% of GDP in FY 2014-15 to 1.1% of GDP in FY 2015-16

Further Readings
http://www.thehindu.com/business/Economy/indias-cad-narrows-sharply-to-03-bn-on-lower-tradedeficit/article8737479.ece
http://www.livemint.com/Politics/Y7bMLxPDsGvpruXSwnjwHJ/Current-account-deficit-declines-to-01of-GDP-in-March-qua.html

News Articles
Microsoft to acquire LinkedIn for $26.2 Billion
US based technology giant Microsoft Corp. has announced a deal to buy social networking and
enterprise network making company, LinkedIn for $ 26.2 Bn. The offer translates to $ 196 per
share, thereby valuing the company at a 49.5% premium over its closing stock price on 10th June
2016. Despite the hefty premium, the share price paid is still lower than LinkedIns all-time high.
LinkedIn had gone public in 2011 debuting at $45 per share at a valuation of $4.25 Bn. The stock
had hit a historical high of $ 270 in 2015. However, due to underperforming only ad revenues
and weak forecasts, the companys stock price has declined from its all time high.

The Deal
The deal, will be an all cash transaction, and has received the approval of both boards. It is
expected to close within the present calendar year. The co-Founder and Chairman of LinkedIn
Mr. Reid Hoffman, is likely to get a windfall of $2.8 Billion from the deal.
LinkedIn will retain its brand identity and the present CEO, Mr. Jeff Weiner, will continue as the
CEO of LinkedIn and will report to Mr. Satya Nadella, the CEO of Microsoft. Morgan Stanley is
the sole advisor for Microsoft, while Qatalyst Partners and Allen & Co. are the advisors for
LinkedIn.

Synergies
For Microsoft, by combining its softwares like Microsoft Office with LinkedIns massive social
network, can provide additional capabilities such as sales, marketing and recruiting services over
its core business products. It will also help Microsoft keep its services like Outlook mail relevant
for customers, in its bid to keep pace with rival Gmail.
For LinkedIn, given its dwindling customer and revenue growth rates, the access to the billion
plus users of Microsofts business solutions can jumpstart a growth phase.
As explained by Mr. Satya Nadella, the CEO of Microsoft, a person walking into a meeting with
potential clients, can be informed, as a part of his/her meeting reminder that one of the
attendees of the meeting went to the same university as him/her.

Implications
This deal could potentially trigger a larger number of deals in this space, with many of the other
technology giants like Alphabet Inc. (Goole Holding Company), Apple Inc., Oracle Inc. etc. having
high cash surpluses and with low and even negative interest rates prevalent in many countries.
One of the rumoured prime targets in this case is Twitter Inc., whose stock price rose 9.1 per
cent to reach an intra-day high. With the Microsoft-LinkedIn deal, the markets seem to be
realising the importance of the newer and data rich technology companies and how these are
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prime targets for the older technology firms, in their fight to remain relevant and not meet a
fate similar to that of Blackberry Inc.
In terms of LinkedIns competitors, with this deal Facebook, that is planning on coming out with
Facebook@Work, will faces stiff competition from LinkedIn and the way Facebook responds to
this will be interesting to trace.

Links for Further Reading:

http://www.livemint.com/Companies/IrhTKgNKjGQc4VOKaN5qAO/Microsoft-says-to-buy-Linkedin-for262-billion.html
http://www.bloomberg.com/news/articles/2016-06-13/microsoft-to-buy-linkedin-in-deal-valued-at-26-2billion-ipe079k9
http://time.com/4368047/microsoft-linkedin-deal-merger-debt/
http://www.reuters.com/article/us-linkedin-m-a-microsoft-idUSKCN0YZ1FP
http://www.bloomberg.com/news/articles/2016-06-13/twitter-jumps-most-in-two-months-aftermicrosoft-buys-linkedin

Monsanto rejects Bayer Corps $62 Billion takeover bid, terms offer as less
Monsanto, worlds leading seed supplier and a pioneer of genetically modified crops rejected
chemical and Pharma major Bayer Corps $62 Bn takeover bid, terming the offer too low for its
liking. The proposed deal, along with China National Chemical Corp.s planned acquisition of
Switzerlands Syngenta AG and the Dow Chemical - DuPont merger had the potential to reshape
the global agricultural industry, potentially leaving only three companies to dominate the
market for key crop inputs.
At the time of bid, Monsantos market value was being pegged at $43 Bn, therefore Bayer
Corps bid was at a premium of 37% to Monsantos value. Monsantos CEO Hugh Grant stated
that the current offer of $122 per share is low and any offer below $135 per share would be
difficult to accept for the board. If accepted, the deal would have created the worlds largest
agrochemical company with annual sales of $26 Bn.

The Offer
Bayer had proposed an all cash deal which was to be funded through a combination of debt and
equity, with about $15.5 billion coming from selling shares to existing investors. Bank of America
Corp. and Credit Suisse Group AG are advising Bayer and helping finance the deal, while
Rothschild has also been retained as an adviser. The offer was a reversal of roles for Monsanto.
The company had sought to buy Syngenta AG, but abandoned its $43.7 billion bid in August last
year after the Swiss pesticide maker refused to agree to a deal.

ChemChina had earlier valued Syngenta at 16x its EBIDTA. A similar multiple for Monsanto
would have translated to an offer of $145 per share by Bayer.

Bayer was on a lookout to dispose assets to reduce possible new debt

Though Bayer had said that it was not looking to sell assets to fund the purchase, they were
silently considering disposing of certain assets to reduce the amount of debt it had to take. On
cards was the potential disposal of its animal-health business and the remaining 69 percent
stake in plastics business Covestro AG for $5 Bn. It was also planning sell Monsantos crop
protection unit for $19 billion to help fund the purchase.

Possible Synergies
Bayer had earlier stated that the deal would have boosted earnings per share by a mid-singledigit percentage in the first full year after completion, and by more than 10 percent thereafter.
The German company also expected savings of about $1.5 billion annually from the fourth year
following the deal.

Links for Further Reading:

http://www.forbes.com/sites/antoinegara/2016/05/23/bayer-offers-to-buy-monsanto-for-62billion/#73c637946bae
http://www.bloomberg.com/news/articles/2016-06-13/monsanto-due-diligence-looms-as-next-step-inbayer-push-for-deal
http://www.bloomberg.com/news/articles/2016-05-19/bayer-s-pursuit-of-45-billion-monsanto-greetedwith-skepticism
http://www.bloomberg.com/news/articles/2016-05-24/monsanto-rejects-62-billion-bayer-offer-open-tofurther-talks