PVR Cinemax Special Situation

Need to do an analysis of this one over the weekend but did a quick check of timeline for Jyothy-Henkel and TechM-Satyam ( similar situations)



1. Board meeting of Jyothy Lab for considering amalgamation                15th June 2012

2. Direction by Bombay High Court to convene meeting of

Shareholders                                                                                               19th October 2012

3. Court Convened Meeting(s) held                                                           22nd November 2012

4. Bombay H.C. approval for amalgamation                                           12th April 2013

5. Effective date of amalgamation ( info to BSE)                                    13th May 2013

6. Record date for determining eligibility for allotment

of shares                                                                                                    28th May 2013

Shares were actually allotted sometime in August due to the fact that NSDL/CDSL wanted clearance from SEBI since SEBI had put Henkel’s name in the list of companies that had not complied with the minimum 25% public shareholding norm. SEBI took more than 2 months to give time for hearing then pass order ( talk of height of ridiculousness of it but that’s the nature of the beast)

Total time taken for liquid trade in shares allotted post amalgamation 1 year 2 1/2 months.

In-between I had a running duel with the co sec of Jyothy as to why it was taking them so long but that’s another story.

Tech Mahindra

1. Board meeting of Tech M for considering amalgamation                21st March 2012

2. Direction by Bombay High Court to convene meeting of

Shareholders                                                                                         3rd May 2012

3. Court Convened Meeting(s) held                                                       7th June 2012

4. Bombay H.C. approval for amalgamation                                       28th September 2012

5. Andhra High Court Approval                                                             11th June 2013

6. Record date for determining eligibility for allotment

of shares                                                                                                    5th July 2013

7. Shares allotted                                                                                     8th July 2013

Total Time taken                      1 year 3 1/2 months.

Notice the speed displayed by the company in dates. This process took time due to Ramalinga Raju controlled entities filing objections in the Andhra High Court.


1. PVR Board approval                                                          15th June 2013

2. Direction of High Court                                                    Not informed in the filing with BSE

3. Court convened meetings of

Shareholders and Creditors                                                  7th December 2013

Notice the similarities between Jyothy and PVR. My take is that big law firms can help speed up the process in HC.

I reckon that barring unforseen circumstances this merger should get over and shares allotted latest by end of June 2014 which is about 7 months away.

Cinemax closed at 286 today and PVR at 577. With a swap ratio of 4:7 ( 4 shares of PVR for 7 shares of Cinemax ), the effective cost per share of PVR works out to Rs 500.5. This means a buyer of Cinemax at CMP should be able to realize a gain of about 15% ( not counting the transaction and demat costs ) in 7-8 months time. This assumes no further fall in PVR prices which is what the analysis will try to figure out. Watch this space.

Happy investing

Henkel-Jyothy Lab ( Tax Issues primer )

Found this interesting presentation on tax issues in Mergers & Acquisitions. Hopefully serious practitioners of special situation investing will find it useful.


Based on available information so far, Jyothy can do both- a high court administered Amalgamation or a reverse merger where apparently High Court permission is not required ( not very sure about this ). A reverse merger would mean Jyothy getting merged into Henkel and the resulting company can be called Jyothy or Jyothy Henkel or whatever.

Moot question is the valuation of Henkel at the time of amalgamation. Well, it can be anything. However, I am going by the assumption that Jyothy wants to be a serious player in Indian FMCG space and will not do anything that smacks of hurting the interest of small shareholders.

Well, there are no guarantees in this business and that is what makes investing so fascinating. I mean, it would be totally boring if all thesis panned out the way they were originally thought of and I am sure there will be some twists in this story as well.

So here is to making some money in this as well!

Happy Investing.

PS; if you hv problem downloading this, send me yr email and I will mail it to you

Henkel and Jyothy Lab situation

Jyothy Lab acquired Henkel India, first by acquiring 14.9% from TN Petro, an AC Muthaiah company which was JV partner of Henkel and then 50.6% of Henkel ( the international company). Besides these they acquired roughly 3% before open offer and about 12-13% in open offer at 41.2 ( all number approximate since I am writing this out of memory ). Currently Jyothy Lab holds 83.5%  of Henkel and Public holds about 16.5% ( approx 19 million shares ).

One of the big kickers for the deal besides the strategic move for Jyothy is the accumulated losses of 450 Cr in Henkel. Integration of businesses is happening at a fairly fast clip and I expect that Henkel will be cash positive and profitable pretty soon, given the prudent cashflow management practices of Jyothy ( something about these Tamilians-they are pretty good with prudent action when they do ).

I am considering buying Henkel which was at 22 day before (already at 24 as I write this ). My thesis is that if Jyothy has to take advantage of this accumulated loss then the only way is amalgamation of Henkel in Jyothy. This means delisting by way of buying out the shareholders or issuing Jyothy shares to 19 million shares of Henkel.

Now, the open offer price was 41 so I expect that Jyothy will price the exchange or cash at the same level atleast. I doubt if it is worth rocking the boat by doing the exchange at a lower level since that can be challanged in the court of law ( a la Cadbury ) and the cost is just about 75-80 Cr.

Also it would be advantageous for Jyothy to do the amalgamation sooner than later to take advantage of tax breaks. Anyways market does not expect big shake from this acquisition and Jyothy share price reflects this. Hence even if they were to take the tax break and show notional losses, shareholders would not lose much.

So I am expecting a 70-90% return over 18 months period in which I expect this process to get complete.

Would someone please punch holes in this thesis?

Happy investing


Piramal Healthcare-Piramal Lifesciences

Piramal Healthcare ( PHC ) is folding in the New Entity Research Business of Piramal Lifesciences ( PLS ) into itself and is issuing 1 shares of itself for every 4 shares of PLS. No shares will be issued for its own stake in PLS. Once this takes effect there will be a dilution of approximately 4% in the earnings for PHC.

Towards the fag-end of today’s trade ( Oct 11,2011), PHC fell off to 348 from 352 while there was strong buying interest in PLS at 88 and above and it closed at 89.

The process of hiving off of the business from PLS has been on since May and the final clearance from Bomaby High is expected any day.

At the current prices, if the residual business of PLS is valued at even Rs 5 per share then the equivalent price for PHC works out to 336 ( 89-5)*4. At zero residual value ( an unlikely event ) the e.v is 356.

If one gets an opportunity to short PHC at a price above 356, I would think that trader is likely to make money.  If the residual value is assessed by the market at more Rs 3 then even after transaction charges there is profit to be made.

I think the whole process should be over within the FNO expiry of November month.

Disclosure: I am long PLS and short PHC for now more than a month.

Pl. take whatever I say with a pinch of salt and do your own research before taking any action. It is your money and that should be very dear to you.