2. : CEMEX S.A.B de C.

V
Organization
Industry : Cement
Countries : Mexico, Australia

Abstract:

CEMEX SAB de CV (CEMEX) is a Mexico based cement company. As of 2009, it is one of

the top ten cement manufacturers in the world. The operations of CEMEX grew rapidly since
the mid-1980s as the company chose both inorganic and organic route for expansion. Over
the years, CEMEX had developed post merger integration expertise and was able to generate
enough cash flows from the acquired company to pay most of the debts it incurred for the
acquisition. However, in mid-2007, CEMEX's acquisition of Australia based Rinker group
landed the company in a financial debt trap. CEMEX paid US$ 14.2 billion to acquire Rinker
and estimated that it would be able to generate enough cash flows from Rinker's operations to
pay off the additional debt obligations that it incurred due to the acquisition

Acquiring Rinker strengthened the operations of CEMEX in the US. However, since late
2007, the real estate market in the US faced a slowdown. The prices in real estate markets
started falling, unemployment increased and several financial institutions went bankrupt.
These events led to poor demand for building materials and tighter credit availability from
banks. CEMEX could not generate enough cash flows in 2008 and 2009 because of fall in
sales. At the same time, it had to refinance its short term debt at several instances leading to
increase in cost of financing. Rating agencies downgraded CEMEX's credit rating leading to
increase in cost of capital. CEMEX had to sell some of its assets, some acquired through
Rinker's acquisition to raise funds and pay off debts. Though selling certain operations
resulted in lower cash flows than estimated, CEMEX remained bullish on the long term
prospects of the US economy and was confident that it would bounce back strongly.

Issues:

» Examine the rationale for CEMEX's acquisition of Rinker.

» Understand the advantages of strong post merger integration expertise.

» Appreciate the importance of timing of an acquisition.

» Analyze the disadvantages of excessive debt financing.

» Study the importance of geographical diversification

3.

Adidas-reebok

The case discusses the proposed merger of

Reebok International Limited with Adidas-
Salomon AG.

It describes the recent trends and studies the

ongoing merger in the sporting goods industry.

The case presents the rationale behind the

decision to merge.

Finally, the case ends with a debate on whether

the merger would be successful.

Issues:

» The recent trends and structure facing the sporting goods industry
» The reasons for the ongoing mergers and acquisitions in the industry and its future
» The rationale behind the Adidas and Reebok merger
» Whether the merger will be successful in the long-term

Both the companies claimed that their missions were complementary. As Fireman remarked,
"Adidas is a perfect partner for Reebok.

Reebok's mission is to enroll global youth inclining towards the music-and-lifestyle image
that it promotes through sports, music and technology.

This complements Adidas's mission to be the leading sports brand in the world, with a focus
on performance and international presence"...

Integration Issues

Adidas said the companies would grow as a combined entity but would retain separate
management. The companies also ruled out any workforce reductions.

The new entity would continue to have separate

headquarters and their individual sales forces.
The companies would also keep most of the
distribution centers independent and would have
separate advertising programs for their brands.
Hainer said, "The brands will be kept separate
because each brand has a lot of value and it
would be stupid to bring them together.

The companies would continue selling products

under respective brand names and labels."
Adidas declared that the deal would involve
investment in both Adidas and Reebok. These
investments would guide the companies towards
effective consolidation.

The Track Ahead

Analysts had varied opinions about the deal. Some analysts felt that Adidas could beat Nike
to become the industry leader. Al Ries said that, "The biggest benefit is that it removes a
competitor. Now, all they need to do is to focus all their efforts on competing with Nike."
However, a few analysts opined that it was impossible to dislodge mahindraNike from its No.
1 position.

Nike was a preferred brand because of its fashion status, colors, and combinations. Although
Adidas was perceived to have good quality products that offered comfort and Reebok was
perceived as a 'cool' brand, Nike was perceived as having both 'hipness' and quality...

4. Mahindra reva

BANGALORE: Mahindra & Mahindra has bought a majority stake in electric car company Reva,
making a big bet on an alternative fuel technology that is yet to prove its viability despite widespread
focus and the millions spent by global automobile firms.

M&M, the country’s largest utility vehicle company, acquired 55.2% in Reva, adding passenger cars to
the auto major’s electric vehicle portfolio that includes Bijlee, a three-wheel vehicle, and Maxximo, an
electric-powered mini-truck due for launch later this year.

Reva’s promoters, the Maini family, will hold 31% in Mahindra Reva Electric Vehicle Company while
Lon Bell, the co-founder, will hold 11% . Employees with stock options will hold the rest. “We expect
that there will be 1.5 million electric cars sold globally. I see no reason why Reva cars will not be
50,000 of that 1.5 million in the next 7 to 10 years; this deal is a part of the larger strategy within the
Mahindra group of focusing on sustained mobility,” said Pawan Goenka, president (automotive & farm
equipment sectors), Mahindra & Mahindra, who will take over as chairman.

The electric vehicle category is considered by experts to hold a lot of potential given the global
clamour to reduce pollution and promote clean air technology. But it has some strong critics.

“We lack confidence,” Tomohiko Kawanabe, president of Honda R&D, recently told Automobile
magazine. “It’s questionable whether consumers will accept the annoyances of limited driving range
and having to spend time charging them,” he added.

Reva’s cars have also not been much of a success since launch in 1994. Only about 3,500 cars are
on the road. The biggest drawback is the battery capacity, its range and the need for repeated
charging. The batteries are also expensive, increasing the cost for carmakers.

Betting on alternative fuel

But that is not stopping companies such as Nissan, Volkswagen and General Motors from investing in
the technology and developing cars.

“The deal is definitely good for both. Mahindra and Mahindra will get hold of a better platform on the
technological aspects for EV vehicles since they also had plans to roll out their mini-trucks Maximo on
an EV platform. Reva on the other hand will benefit from Mahindra’s strength in network, sales and
marketing,” said Vaishali Jajoo, senior analyst at Angel Broking.

Mahindra is betting that alternative fuel development can give it the cutting edge to compete in a
highly-competitive global marketplace.

The announcement of this deal has led General Motors to scrap an existing licensing agreement with
Reva to develop an electric-powered version of Spark. “GM has told us that they will look at other
options for Spark,” said Chetan Maini, chief of technology & strategy, Mahindra Reva, who co-founded
the electric carmaker in 1994 as a joint venture with California-based AEV LLC.

For the new company, licensing technology will form only a small part of the overall business that will
focus primarily on the launch of new products. Mr Goenka did not reveal the total value of the
transaction. The Mahindra stake was acquired through a combination of equity purchased from the
promoters and a fresh equity infusion of over Rs 45 crore ( about $10 million) that will be used to
complete the construction of a new manufacturing facility in Bangalore.