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L&T Drama (RIL Takeover of L&T)

The one battle lost

One corporate battle which Dhirubhai did not win was the battle for control of
Larsen & Toubro. In 1988, L&T was in bad shape, and the Ambanis thought that
the time was ripe for an acquisition. Having secured the support of L&T's
chairman, who saw Dhirubhai as a white knight in the battle against the raider
Manu Chhabria, Mukesh and Anil Ambani became directors of L&T. By April 1989,
Dhirubhai became chairman of L&T.

Reliance, L&T's biggest private-sector customer, bought 12.4 percent and got
two nominees on the L&T board. L&T later won a substantial contract to build
Reliance's Hazira petrochemical plant. Meanwhile a state-linked financial
company bought L&T shares from India's biggest mutual fund and largest
insurance company. It then sold the shares to a little-known investment company
connected with Reliance. Desai surprised the L&T board by stepping down, and
Ambani took over as chairman. Bombay's clubby corporate world was shocked at
what seemed to be a behind-the-scenes takeover.

Unfortunately, things didn't go smoothly. In December Reliance's old bete noire,


VP Singh, became prime minister. The Indian Express once again did the muckraking, and found that the takeover had been effected by financial institutions
like the Life Insurance Corporation and the General Insurance Corporation selling
their shares. Since the institutions were not allowed to sell to private parties, the
Indian Express alleged that the whole operation was a fraud.

The matter moved to the courts. Sensing defeat, the Ambanis reversed the
transaction, taking a substantial loss. An extraordinary general meeting was
called to decide whether the Ambanis would remain on the L&T board. Dhirubhai
resigned. Eleven years later, Reliance sold its holdings in L&T to Grasim. Even
that transaction was not free of controversy, as the Securities and Exchange
Board of India felt that Reliance should not have bought L&T shares from the
market a few months before deciding to sell its stake. The insider trading charge
was settled with Reliance paying a nominal fine.

ORACLE ACQUISITION OF PEOPLESOFT


On January 07, 2005, Oracle Corporation, the second largest software company in
the world, announced that it would acquire PeopleSoft Inc.3 at $10.3 bn.

The announcement followed a tender offer in which more than 97 percent of


PeopleSoft's shareholders tendered their stock. Post-merger, Oracle would emerge
as the second largest manufacturer of business application software in the world.
Oracle first made its hostile bid to acquire PeopleSoft on June 06, 2003. Meanwhile,
in July 2003, PeopleSoft acquired JD Edwards.4 Oracle's acquisition of PeopleSoft
finally materialized after an 18-month struggle between the two companies that
involved multiple litigations and bitter exchanges between Oracle's Larry Ellison
(Ellison) and the then PeopleSoft's CEO Craig Conway (Conway). The acquisition was
unique in many ways. It raised corporate governance issues when PeopleSofts
shareholders opposed the use of poison pills by the company's management. It also
led to debates regarding the use of poison pills and whether prevailing regulations
required a review. It brought defeat to the US Department of Justice (DOJ) in an
antitrust case, thus encouraging bigger consolidations in the software industry, in
future
Oracle had initially announced that it would discontinue PeopleSoft's products. Later,
the company changed its stand and stated that it would support the products and
would not drop them immediately. Most analysts expressed doubts on the success of
the merger.
On June 06, 2003, Oracle announced its bid to acquire PeopleSoft for $16 per share
or approximately $5.1 billion in cash. The offer was made just four days after
PeopleSoft had announced its decision to buy JD Edwards for $1.7 billion in stock....

The top five hostile takeovers of


all time
1. AOL AND TIME WARNER, $164BN, 2000
When AOL announced it was taking over the much larger and successful Time
Warner, it was hailed the deal of the millennium. But the dotcom boom meant the
new AOL Time Warner lost over $200bn in value in less than two years.

2. SANOFI-AVENTIS AND GENZYME CORP, $24.5BN, 2010


Sanofi fought hard to takeover biotechnology company Genzyme in 2010. It had to
offer significantly more per share than they initially wanted before triggering a topup option to assume control over around 90 percent of its target company.

3. NASDAQ OMX/INTERCONTINENTALEXCHANGE AND NYSE EURONEXT, $13.4BN,


2011
In a battle for control over the New York Stock Exchange, Nasdaq was determined to
undermine Deustche Borses bid to buy the NYSE parent company with an
unsolicited and valuable bid. Nasdaq was ultimately forced to withdraw its $13.4bn
offer amid concerns from regulators.

4. ICAHN ENTERPRISES AND CLOROX, $11.7BN, 2011


When Clorox refused Icahns bid of $10bn, CEO Carl Icahn sent a full-caps letter to
the Clorox board directly telling them shareholders should decide on the takeover.
Though the bid was eventually raised to $11.7bn, Icahn was eventually forced to
withdraw and drop the push for a proxy fight.

5. AIR PRODUCTS & CHEMICALS AND AIRGAS, $7.94BN, 2010


Airgas was forced to take Air Products to court in Delaware to avoid the hostile
takeover, after the buyer attempted to seal the deal over the course of a year. The
main point of contention was the price per share Air Products was offering, and
eventually a judge sided with the short-changed seller.

It can best be argued that hostile takeovers are ethical. Usually, only weak companies face
hostile takeovers, and, typically, shareholders and customers of the company benefit from the
new organization. Most employees and managers benefit, too, but some employees and top
managers usually lose their jobs when the takeover is consummated. From this angle, some of
you may argue that hostile takeovers are unethical.