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African Safari
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DIFFERENCE BETWEEN
MERGER AND ACQUISITION
When one company takes over another and clearlyestablishes itself as the new owner, the purchase is calledan acquisition. From a legal point of view, the target
company ceases to exist, the buyer "swallows" the businessand the buyer's stock continues to be traded.
In the pure sense of the term, a merger happens when two
firms agree to go forward as a single new company ratherthan remain separately owned and operated
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MOTIVES BEHIND MERGER AND
ACQUISITION
Increased revenue or market share: This assumes that
the buyer will be absorbing a major competitor and thus
increase its market power (by capturing increased market
share) to set prices.
Economy of scale: This refers to the fact that the
combined company can often reduce its fixed costs byremoving duplicate departments or operations
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Synergy
For example, managerial economies such as the
increased opportunity of managerial specialization.
Another example are purchasing economies due to
increased order size and associated bulk-buying discounts.
Taxation: A profitable company can buy a loss maker to
use the target's loss as their advantage by reducing theirtax liability.
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About Bharti Airtel
Bharti Airtel is Asias leading integrated telecom servicesproviders with operations in India, Sri Lanka and Bangladesh.
The Company is divided into 4 business units that are:1. Mobile
2. Telemedia (Broadband, IPTV and Telephoneservices)
3. Enterprise (End-to-End telecom solutions)
4. Digital TV (Direct-to-Home TV)
Sunil Bharti Mittal is the Chairman & Managing Director of
Bharti Airtel Ltd. head quartered at New Delhi, India.
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What is the Deal?
Bharti Airtel has made an offer to buy the African Asset
of Kuwaits Zain Telecom for $10.7 Billion. Zain board
has approved the offer.
This deal will fire Bhartis global ambitions and will
catapult it to become the worlds seventh largest mobilephone company by subscribers.
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Contd..
The combined subscriber base of Bharti and Zains
African Assets will be 164 million.
Financially, the market value of the combined entitywill be just under $42 billion, with annual revenues of
more than $12 billion and profits nearly $2 billion.
Cash and assets will be under $3 billion.
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Bharti Airtel Hits
Indias largest telecom firm, Bharti Airtel Ltd, has affirmed
its ambitions to expand beyond India by buying a 70%
stake in Bangladeshs fourth largest telecom firm, Warid
Telecom International Ltd.
REASONS
Declining revenue per subscriber has forced Bharti Airtelto look for firms in overseas markets with higher average
returns. Last year, it tried to buy South Africas MTN
Group Ltd, but failed.
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AMOUNT OF INVESTMENT MADE
Bharti will initially invest $300 million (Rs1,362 crore) in
Warid to expand its operations. The firm will gain control of
Warids board and daily operations, while current owners,the Dhabi Group, will hold the remaining 30% stake
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Recent Scenario
Legal dispute over Zain Nigeria threatens to disrupt Bharti-
Zain deal.
Funding Mechanics
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Conclusion
This deal opens up opportunities for Bharti Airtel
in African telecom market and puts it in directcompetition with MTN.