a) Executive Summary2
b) MergerDefinition 4
c) Tobacco Industry in Malaysia6
d) Background of Merger Case Study8
- Rothmans of Pall Mall (M) Bhd
- Malaysia Tobacco Company Bhd (MTC)
e) Merger Transaction Details10
f) Merger Results – Financial Performance11
a) Executives Summary
The executive summary provides an overall view of the topic of reviewing Merger between Rothmans of Pall Mall (Malaysia) Berhad and Malaysian Tobacco Company Berhad. The report will evaluate the impact of the merger between the two companies which resulted in the capture of the largest market share in cigarettes manufacturing in Malaysia and the emerged of a “Winning Organization” tagline for British American Tobacco Malaysia Berhad.
The submission is also a part of requirement for completion of FIN 745 - Managerial Finance subject.
This section will provide the basic elucidation from the academic view and the basic principles of a merger.
❖ Tobacco Industry in Malaysia
This section will provide the overview of Tobacco Industry players, market share and brand name in which the players presents.
❖ Background of Merger Case Study
The background section will provides the merged companies and the information of the new emerge company resulted from the merger.
❖ Merger Transaction Details
This section will provide transaction details of how the merger took and what had transpired during the merger process.
❖ Merger Results –Financial Performance
Merger results will analyse the outcome from the financial performance perspective during and after the merger.
This section will provide the conclusion of the merger which happened between Rothmans of Pall Mall (Malaysia) Berhad and Malaysian Tobacco Company Berhad.
1. Definition of Merger
Merger is defined as the combination of two or more firms, in which the resulting firm maintains the identity of one of the firms, usually the larger one.
2. Motives of Merger
i. Growth or Diversification
Firms that desire rapid growth in size of market share or diversification in their range of products
The synergy of merger is the economies of scale resulting from the merged firms’ lower overhead. Synergy is most obvious when Horizontal merger take place as many redundant functions and employees can be eliminated.
iii. Fund Raising
Fund-raising merger motive happens when a “cash rich” firm merges with a “cash poor” firm. This will allow funds to be raised externally at lower cost as it will increase the borrowing power by decreasing its financial leverage.
iv. Increased Managerial Skill or Technology
Increased Managerial Skill or Technology happens when the merger motive is to adapt or combine the managerial personal skill or acquire the technology needed.
v. Tax Considerations
Tax Considerations motive happens when a firm merge with another as acquire the target’s tax loss carryforward. The tax loss can be applied against a limited amount of future income of the merged firm.
3. Types of Merger
i. Horizontal Merger
Horizontal merger is a merger of two firms in the sale line of business.
ii. Vertical Merger
Vertical merger is a merger in which a firm acquires a supplier or a customer.
iii. Congeneric Merger
Congeneric merger is a merger in which one firm acquires another firm that is in the same general industry but neither in the same line of business not a supplier or a customer.
iv. Conglomerate Merger
Conglomerate merger is a...