case of williomsen and everday merger.pdf - Mimts.org

MRIL is a player in the commodity business of selling loose tea and is closely moving towards
the branded segment of the market.
Four, while MRIL has shown a growth of 6 percent in financial year 96 indicating that the Tea
market is maturing and batteries market is growing at significant rate of 15 percent annually
indicating that MRIL would be drag on the fast growing batteries business. In addition to it, EIIL
is fast diversifying into silver Exide watch batteries and alkaline battery business which requires
substantial capital expenditure and are synergistic to the present business of EIIL.
In addition to the above reasons, the share prices of the two companies have moved in a
curious manner on the bourses when the merger was in the offing. While McLeod Russel‟s
share price declined from around Rs. 112 on 29 August to Rs. 89 on 23 September, the day
before the merger was announced. But in the case of EIIL, its share price slide from around
Rs.160 in mid – July to Rs. 122 on August 29, but rebounded to Rs. 142 in the three weeks
leading to the merger. The differences between the share prices of the two companies on 23
September – Rs.53 justify the merger ratio of two EIIL shares for every three shares of McLeod
Russel. But if the merger were to take place on 30 August, the ratios would have been different
indicating that shareholders of EIIL were at a loss.
Question:
1. Comment on the merger of these two companies keeping in view the value increase by
the business for both the companies.
Reference:
This case was developed based on discussion with Mr. Srutikanta Paul, the then
Executive Director of Williamson Megor for a workshop on merger and strategic alliance
for the senior level managers of Eveready and WM Group. Copy right A. Dutta ©