Global Mergers and Acquisitions-An event study analysis onTata Chemicals and British Salt.
Amit Sharma
Research Scholar, IBM, CSJM University, CSJM University, Kanpur, India
ABSTRACT:
This study presents the effect of Global Merger on stock prices of Tata Chemicals. We examine shareholder wealth gains of Tata Chemicals that acquired British Salt in Dec 2010. This study analyses global merger by Tata Chemicals in UK and the returns to shareholders as a result of the merger, using the event study methodology (Brown and Warner, 1980, 1985; and MacKinlay, 1997).We find that foreign acquirers experience positive and significant abnormal returns of nearly two percent over days (- 10,+ 10) when they acquire target in the UK.
To capture the impact on stock prices as a result of global M&A using the event study methodology. Using the single-factor model the study finds that the average cumulative abnormal return (CAR) of the Tata Chemicals is positive and substantial. These results are statistically significant also. Thus, the bidder firm got significant positive abnormal returns. The single-factor model finds that the combined CAR is positive, significant and substantial. The bidder firm created a wealth of Rs 33.73 million in a one day window (single-factor model) as a result of the merger. The merger announcements of Tata Chemicals have positive and significant shareholder wealth effect both for bidder and target firm.
The aim is to understand the shareholder wealth effects of merger.
· Using the single-factor model, the study finds that the average cumulative abnormal return (CAR) of the Tata Chemicals is positive and substantial. These results are also statistically significant. Thus, the bidder firm got significant positive abnormal returns.
· The single-factor model finds that the combined CAR for the target firm is positive, significant, and substantial.
The bidder firm created a wealth of Rs 33.73 million in a one-day window (single factor model) as a result of the merger.
KEYWORDS: Merger and Acquisition, Event Study insert.
INTRODUCTION:
Mergers and acquisitions are a high risk form of business activity involving the collective annual investment of millions of rupees and affecting the working lives of millions of employees and the share holder’s wealth. It has been suggested that in the long term between 50-80 per cent of all mergers are considered to be financially unsuccessful (Marks, 1988b), and in terms of financial return, represent ‘at best an each way bet’ (Lorenz, 1986). Although mergers and acquisitions frequently fail to achieve the financial synergy or ‘2 + 2 = 5 effect’ (Hovers, 1973) initially expected, the popularity of this form of business activity has not diminished (Farrent, 1970; Jemison and Sitkin, 1986; Bruckman and Peters, 1987).
To analyze the impact of merger on shareholder wealth we used ‘event study methodology’ which measures the specific impact of corporate decisions on shareholder wealth. This technique is widely used in practice to assess the change in shareholder wealth generated by announcements of corporate events (e.g., security offerings, mergers, lawsuits, earnings).
The event study methodology is designed to investigate the effect of an event on a specific dependant variable. A commonly used dependent variable in event studies is the stock price of the company. The definition of such an event study will be ‘a study of the changes in stock price beyond expectation (Abnormal returns) over a period of time (event window). We attribute the abnormal returns to the effects of the event.’ The event study methodology seeks to determine whether there is an abnormal stock price effect associated with an event. From this, the researcher can infer the significance of the event. The key assumption of the event study methodology is that the market must be efficient. Given an efficient market, the effects of the event will be reflected immediately in the stock prices of the company. This will allow us to observe the economic effect of the event over a relatively short period.
The event that affects a firm's valuation may be: 1) within the firm's control, such as the event of the announcement of a stock split. 2) Outside the firm's control, such as a macroeconomic announcement that will affect the firm's future operations in some way.
Various events have been examined: –mergers and acquisitions –earnings announcements –issues of new debt and equity –announcements of macroeconomic variables –IPO’s –dividend announcements. –etc.
Event Study Design:
Time-line • The time-line for a typical event study is shown below in event time: - The interval T0-T1is the estimation period - The interval T1-T2 is the event window - Time 0 is the event date in calendar time - The interval T2-T3 is the post-event window - There is often a gap between the estimation and event periods.
We have to first decide on the event that we wish to investigate, and then collect data of company that had went through such an event. The data that we need includes the merger date (eg. date of a merger and acquisition event), the stock prices of the company before and after the event (eg -252(To - T1), -10(T1 - 0), 0 (Event day), +10(0 - T2).
Getting Parameter Estimates:
Alpha and Beta are the two parameter estimates and are determined in estimation period. Alpha is the intercept of the regression line and stands for risk free rate. Beta is the slop coefficient of the regression line and stands for systematic risk. In the formula, is the daily return of market index in estimation period and is the average daily return of market index in estimation period. Similarly, is the daily return of individual share price in estimation period and is the average daily return of individual share price in estimation period.
Getting the Abnormal Returns:
After Alpha and Beta have been obtained, the focus should be turned to Event Period, in which the daily expected return of individual share price can be obtained by replacing the parameter estimations to event period. The formula is shown in the following figure.
E(Rs)= α + β Rm
Daily expected return of individual share price can be determined by replacing the Alpha and Beta from estimation period here. Then the daily abnormal return in test period can be calculated by applying this equation. Please see the equation below:
ARs = Rs – E(Rs)
The daily abnormal return of the individual share price in test period equals the difference between the daily actual return in test period and the daily expected return in test period. After that, the cumulative abnormal return in test period and average abnormal return in test period can be calculated based on the daily abnormal return in test period. These are the typical required results for supporting further analysis of the event to see whether this event leads to a positive or negative effect on the value of the company.
Significance Test:
Sometimes a result value may only be generated by chance. The result value always needs to be tested to see whether it is statistically significant. This leads to the Significance Test. Basic method is to see whether the final value generated from significance test is located in the accept region. The formula is: the mean of the tested sample times the square root of the tested sample size then divided by the standard deviation of the tested sample. People normally use the 95% significance level and the accept region is from -1.96 to +1.96. If the final value is between -1.96 to +1.96, this result value will be called statistically significant.
Steps of Event Study:
1. Identify specific calendar event dates of a company and set it as an event date point.
2. Determine the length of both event period and estimation period.
3. Download the historical files of both share price and stock market index data. The data files should contain the calendar dates of both estimation period and event period.
4. Calculate the daily returns of both individual share price and market index data. Normally, daily returns are used, so the returns shall be daily returns. These are actual returns.
5. Calculate the two parameter estimates Alpha and Beta by using the return generating model to the data from the estimation period.
6. Get back to event period and use the two parameter estimates get from the estimation period to determine the (daily) expected return of the share price in event period.
7. Calculate the (daily) abnormal returns in event period and derive cumulative abnormal return and average abnormal return in event period.
8. Do significant test for the required results.
Company Profile:
Tata Chemicals Limited is a global company with interests in businesses that focus on LIFE: Living, Industry and Farm Essentials. The story of the company is about harnessing the fruits of science for goals that go beyond business.
This story began in Mithapur, Gujarat in western India with the creation of a plant that would raise a wealth of marine chemicals from the ocean, with the potential to touch human lives in many ways. From these humble beginnings a market-leading international business has been created, with operations across four continents.
Through its living essentials portfolio the company has positively impacted the lives of millions of Indians. Tata Chemicals is the pioneer and market leader in India’s branded Iodized salt segment. With the introduction of an innovative, low-cost, nanotechnology-based water purifier, it is providing affordable, safe drinking water to the masses.
Tata Chemicals is the world’s second largest producer of soda ash with manufacturing facilities in Asia, Europe, Africa and North America. The company’s industry essentials product range provides key ingredients to some of the world’s largest manufacturers of glass, detergents and other industrial products.
The announcement made on 20th December, Brunner Mond confirmed its acquisition of Cheshire Salt Holdings Ltd (CSHL), the parent company of British Salt, following approval by competition authorities. CSHL was previously owned by LDC, the UK's leading mid-market private equity firm.
British Salt produces approximately half of the UK's pure salt used in applications ranging from food processing to chemicals production. The long history of British Salt in the manufacture of bulk commodity products will complement the similar experience of Brunner Mond and will strengthen the capability of the combined businesses.
“Martin Ashcroft, Managing Director of Brunner Mond, said: "I am delighted to be able to confirm completion of Brunner Mond's acquisition of British Salt. We are confident there will be strong benefits for both companies with new opportunities with customers around the world. Work will now commence on integrating activities where this makes sense to do. This is the beginning of an exciting new chapter for both businesses.
"Bill Thompson, Chief Executive Officer of British Salt, adds "This move provides a major opportunity to achieve growth in our chosen markets and to add value to our existing customers. I am confident we will be able to capture best practices from both businesses for our future combined success."
Data analysis:
Tata Chemicals- Market Index |
||||
Date |
Adj Close |
Return TATA Chem |
Adj Close |
Market Return BSE S&P 500 |
12/2/2009 |
256.7 |
0.039482 |
6717.3 |
0.0020108 |
12/3/2009 |
265.48 |
0.034203 |
6741.3 |
0.0035714 |
12/4/2009 |
267.88 |
0.00904 |
6720.3 |
-0.003117 |
12/7/2009 |
264.9 |
-0.01112 |
6666.1 |
-0.008059 |
12/8/2009 |
271.16 |
0.023632 |
6762.4 |
0.0144507 |
12/9/2009 |
268.43 |
-0.01007 |
6722.7 |
-0.005869 |
12/10/2009 |
266.37 |
-0.00767 |
6746.6 |
0.0035536 |
12/11/2009 |
264.73 |
-0.00616 |
6714.7 |
-0.004739 |
12/14/2009 |
264.77 |
0.000151 |
6699.2 |
-0.002304 |
12/15/2009 |
263 |
-0.00669 |
6603.8 |
-0.014246 |
12/16/2009 |
267.08 |
0.015513 |
6617.1 |
0.0020291 |
12/17/2009 |
274.69 |
0.028493 |
6633.3 |
0.0024391 |
12/18/2009 |
268.22 |
-0.02355 |
6577 |
-0.008482 |
12/21/2009 |
264.52 |
-0.01379 |
6536.3 |
-0.0062 |
12/22/2009 |
264.27 |
-0.00095 |
6586.1 |
0.0076267 |
12/23/2009 |
269.39 |
0.019374 |
6755.1 |
0.0256677 |
12/24/2009 |
270.7 |
0.004863 |
6798.4 |
0.0064084 |
12/29/2009 |
270.4 |
-0.00111 |
6815.9 |
0.0025609 |
12/30/2009 |
279.77 |
0.034652 |
6807 |
-0.001294 |
12/31/2009 |
270.82 |
-0.03199 |
6842.3 |
0.0051741 |
1/1/2010 |
270.82 |
0 |
6842.3 |
0 |
1/4/2010 |
273.18 |
0.008714 |
6903.6 |
0.0089707 |
1/5/2010 |
276.96 |
0.013837 |
6974.5 |
0.0102642 |
1/6/2010 |
276.5 |
-0.00166 |
6994.1 |
0.0028188 |
1/7/2010 |
270.28 |
-0.0225 |
6971.4 |
-0.00325 |
1/8/2010 |
266.54 |
-0.01384 |
6957.3 |
-0.002023 |
1/11/2010 |
268.93 |
0.008967 |
6987.8 |
0.0043867 |
1/12/2010 |
260.78 |
-0.03031 |
6929.1 |
-0.008403 |
1/13/2010 |
264.1 |
0.012731 |
6965.4 |
0.0052287 |
1/14/2010 |
265.11 |
0.003824 |
7006.2 |
0.0058633 |
1/15/2010 |
262.08 |
-0.01143 |
7005.3 |
-0.000131 |
1/18/2010 |
266.37 |
0.016369 |
7039.7 |
0.004912 |
1/19/2010 |
265.36 |
-0.00379 |
6982.8 |
-0.008076 |
1/20/2010 |
262.63 |
-0.01029 |
6973.7 |
-0.001302 |
1/21/2010 |
260.9 |
-0.00659 |
6803.1 |
-0.024466 |
1/22/2010 |
260.82 |
-0.00031 |
6730.9 |
-0.010614 |
1/25/2010 |
256.87 |
-0.01514 |
6676.1 |
-0.00814 |
1/27/2010 |
244.98 |
-0.04629 |
6450.8 |
-0.033753 |
1/28/2010 |
238.08 |
-0.02817 |
6477.6 |
0.004153 |
1/29/2010 |
250.14 |
0.050655 |
6509.9 |
0.0049911 |
2/1/2010 |
255.99 |
0.023387 |
6561.3 |
0.0078895 |
2/2/2010 |
248.84 |
-0.02793 |
6475 |
-0.013144 |
2/3/2010 |
253.84 |
0.020093 |
6598.6 |
0.0190888 |
2/4/2010 |
250.31 |
-0.01391 |
6484.6 |
-0.017273 |
2/5/2010 |
239.55 |
-0.04299 |
6314.7 |
-0.026202 |
2/8/2010 |
245.77 |
0.025965 |
6382 |
0.0106465 |
2/9/2010 |
249.26 |
0.0142 |
6424.6 |
0.0066892 |
2/10/2010 |
243.13 |
-0.02459 |
6389.1 |
-0.005527 |
2/11/2010 |
241.74 |
-0.00572 |
6464 |
0.0117152 |
2/15/2010 |
238.63 |
-0.01287 |
6427.5 |
-0.005639 |
2/16/2010 |
240.52 |
0.00792 |
6492.4 |
0.0100956 |
2/17/2010 |
241.11 |
0.002453 |
6561.2 |
0.0105862 |
2/18/2010 |
244.81 |
0.015346 |
6523.1 |
-0.005793 |
2/19/2010 |
248.42 |
0.014746 |
6458.1 |
-0.009974 |
2/22/2010 |
239.93 |
-0.03418 |
6452 |
-0.000951 |
2/23/2010 |
239.85 |
-0.00033 |
6451.6 |
-5.43E-05 |
2/24/2010 |
239.01 |
-0.0035 |
6439.2 |
-0.00192 |
Tata Chemicals- Market Index |
||||
Date |
Adj Close |
Return TATA Chem |
Adj Close |
Market Return BSE S&P 500 |
2/25/2010 |
236.19 |
-0.0118 |
6432.8 |
-0.001002 |
2/26/2010 |
242.37 |
0.026165 |
6518.4 |
0.01331 |
3/2/2010 |
240.18 |
-0.00904 |
6644.8 |
0.0193944 |
3/3/2010 |
251.32 |
0.046382 |
6739.5 |
0.0142503 |
3/4/2010 |
258.34 |
0.027933 |
6752.3 |
0.0018992 |
3/5/2010 |
258.89 |
0.002129 |
6775.1 |
0.0033855 |
3/8/2010 |
266.49 |
0.029356 |
6816.9 |
0.0061622 |
3/9/2010 |
261.11 |
-0.02019 |
6778 |
-0.005712 |
3/10/2010 |
261.2 |
0.000345 |
6784.2 |
0.0009207 |
3/11/2010 |
258.8 |
-0.00919 |
6793 |
0.0012985 |
3/12/2010 |
255.94 |
-0.01105 |
6789 |
-0.000583 |
3/15/2010 |
261.11 |
0.0202 |
6766.5 |
-0.003316 |
3/16/2010 |
262.37 |
0.004826 |
6843.5 |
0.0113692 |
3/17/2010 |
263.51 |
0.004345 |
6878.3 |
0.0050865 |
3/18/2010 |
261.83 |
-0.00638 |
6893 |
0.0021343 |
3/19/2010 |
258.93 |
-0.01108 |
6913 |
0.002903 |
3/22/2010 |
259.85 |
0.003553 |
6844.4 |
-0.009919 |
3/23/2010 |
260.78 |
0.003579 |
6864.6 |
0.0029528 |
3/25/2010 |
254.35 |
-0.02466 |
6893.7 |
0.0042436 |
3/26/2010 |
263.72 |
0.036839 |
6931.1 |
0.0054266 |
3/29/2010 |
268.09 |
0.016571 |
6951.1 |
0.0028826 |
3/30/2010 |
267.67 |
-0.00157 |
6926.2 |
-0.003584 |
3/31/2010 |
274.73 |
0.026376 |
6919.5 |
-0.000963 |
4/1/2010 |
269.39 |
-0.01944 |
6980.2 |
0.0087636 |
4/5/2010 |
271.03 |
0.006088 |
7074 |
0.0134409 |
4/6/2010 |
271.2 |
0.000627 |
7085.1 |
0.0015678 |
4/7/2010 |
270.95 |
-0.00092 |
7106.9 |
0.0030811 |
4/8/2010 |
270.86 |
-0.00033 |
7032.5 |
-0.010467 |
4/9/2010 |
272.12 |
0.004652 |
7099.9 |
0.0095712 |
4/12/2010 |
274.77 |
0.009738 |
7072.9 |
-0.003792 |
4/13/2010 |
280.36 |
0.020344 |
7057.6 |
-0.00217 |
4/15/2010 |
275.87 |
-0.01602 |
7007.5 |
-0.007097 |
4/16/2010 |
274.23 |
-0.00594 |
6985.6 |
-0.003121 |
4/19/2010 |
271.66 |
-0.00937 |
6910.8 |
-0.010708 |
4/20/2010 |
273.93 |
0.008356 |
6965 |
0.0078442 |
4/21/2010 |
274.81 |
0.003212 |
7001.3 |
0.0052017 |
4/22/2010 |
278.3 |
0.0127 |
7021.1 |
0.002831 |
4/23/2010 |
286.2 |
0.028387 |
7049.6 |
0.0040649 |
4/26/2010 |
289.94 |
0.013068 |
7078.9 |
0.004152 |
4/27/2010 |
295.11 |
0.017831 |
7063.9 |
-0.002112 |
4/28/2010 |
288.85 |
-0.02121 |
6953.9 |
-0.015583 |
4/29/2010 |
290.2 |
0.004674 |
7001.4 |
0.0068423 |
4/30/2010 |
297.3 |
0.024466 |
7042.7 |
0.0058903 |
5/3/2010 |
297.13 |
-0.00057 |
6993.3 |
-0.00701 |
5/4/2010 |
287.34 |
-0.03295 |
6886 |
-0.015342 |
5/5/2010 |
288.81 |
0.005116 |
6875.8 |
-0.001481 |
5/6/2010 |
284.52 |
-0.01485 |
6842.1 |
-0.004897 |
5/7/2010 |
276.03 |
-0.02984 |
6715.9 |
-0.018455 |
5/10/2010 |
285.83 |
0.035503 |
6918.3 |
0.0301361 |
5/11/2010 |
283.64 |
-0.00766 |
6841.2 |
-0.011143 |
5/12/2010 |
280.82 |
-0.00994 |
6866.2 |
0.0036573 |
5/13/2010 |
282 |
0.004202 |
6913.1 |
0.0068261 |
5/14/2010 |
281.58 |
-0.00149 |
6819 |
-0.013602 |
5/17/2010 |
285.11 |
0.012536 |
6785.2 |
-0.004964 |
5/18/2010 |
285.49 |
0.001333 |
6795.7 |
0.0015519 |
5/19/2010 |
277.8 |
-0.02694 |
6611.1 |
-0.02717 |
5/20/2010 |
272.5 |
-0.01908 |
6637 |
0.0039131 |
5/21/2010 |
266.91 |
-0.02051 |
6592.4 |
-0.006717 |
5/24/2010 |
256.95 |
-0.03732 |
6602.5 |
0.0015336 |
Tata Chemicals- Market Index |
||||
Date |
Adj Close |
Return TATA Chem |
Adj Close |
Market Return BSE S&P 500 |
5/25/2010 |
249.47 |
-0.02911 |
6418.7 |
-0.027838 |
5/26/2010 |
255.73 |
0.025093 |
6545.1 |
0.0197003 |
5/27/2010 |
273.55 |
0.069683 |
6639.2 |
0.0143756 |
5/28/2010 |
267.8 |
-0.02102 |
6728.8 |
0.0134895 |
5/31/2010 |
270.36 |
0.009559 |
6782.4 |
0.0079643 |
6/1/2010 |
265.48 |
-0.01805 |
6654.8 |
-0.018815 |
6/2/2010 |
259.35 |
-0.02309 |
6718.2 |
0.0095331 |
6/3/2010 |
264.77 |
0.020898 |
6819.1 |
0.0150233 |
6/4/2010 |
268.59 |
0.014428 |
6845.5 |
0.0038598 |
6/7/2010 |
263.64 |
-0.01843 |
6726.9 |
-0.017321 |
6/8/2010 |
259.68 |
-0.01502 |
6671.4 |
-0.008248 |
6/9/2010 |
258.68 |
-0.00385 |
6700.5 |
0.0043634 |
6/10/2010 |
262.42 |
0.014458 |
6792.9 |
0.013793 |
6/11/2010 |
261.2 |
-0.00465 |
6827.5 |
0.0050832 |
6/14/2010 |
264.48 |
0.012557 |
6916.8 |
0.0130854 |
6/15/2010 |
268.38 |
0.014746 |
6950.3 |
0.0048375 |
6/16/2010 |
264.22 |
-0.0155 |
6962.5 |
0.0017654 |
6/17/2010 |
262 |
-0.0084 |
7007.2 |
0.0064187 |
6/18/2010 |
259.85 |
-0.00821 |
6980.5 |
-0.003815 |
6/21/2010 |
266.37 |
0.025091 |
7092.9 |
0.0161034 |
6/22/2010 |
264.9 |
-0.00552 |
7059.4 |
-0.004719 |
6/23/2010 |
269.1 |
0.015855 |
7081.9 |
0.0031801 |
6/24/2010 |
276.12 |
0.026087 |
7077.3 |
-0.000647 |
6/25/2010 |
274.06 |
-0.00746 |
7032.5 |
-0.006326 |
6/28/2010 |
274.65 |
0.002153 |
7113.3 |
0.0114895 |
6/29/2010 |
278.85 |
0.015292 |
7035.8 |
-0.010905 |
6/30/2010 |
280.82 |
0.007065 |
7092.2 |
0.0080219 |
7/1/2010 |
277.46 |
-0.01196 |
7039 |
-0.007508 |
7/2/2010 |
278.5 |
0.003748 |
7023.6 |
-0.002184 |
7/5/2010 |
279.92 |
0.005099 |
7025.4 |
0.000262 |
7/6/2010 |
281.52 |
0.005716 |
7083.6 |
0.0082771 |
7/7/2010 |
279.8 |
-0.00611 |
7038.3 |
-0.006398 |
7/8/2010 |
280.23 |
0.001537 |
7103 |
0.0091997 |
7/9/2010 |
282.09 |
0.006637 |
7163.5 |
0.0085119 |
7/12/2010 |
283.21 |
0.00397 |
7193.8 |
0.004234 |
7/13/2010 |
283.9 |
0.002436 |
7224.6 |
0.0042898 |
7/14/2010 |
280.57 |
-0.01173 |
7204.8 |
-0.002742 |
7/15/2010 |
280.14 |
-0.00153 |
7196.9 |
-0.001101 |
7/16/2010 |
280.27 |
0.000464 |
7223.8 |
0.0037321 |
7/19/2010 |
280.36 |
0.000321 |
7221.3 |
-0.000345 |
7/20/2010 |
280.88 |
0.001855 |
7197.2 |
-0.00334 |
7/21/2010 |
283.64 |
0.009826 |
7234.3 |
0.0051659 |
7/22/2010 |
281.7 |
-0.00684 |
7281.9 |
0.0065701 |
7/23/2010 |
282.34 |
0.002272 |
7276.6 |
-0.000728 |
7/26/2010 |
282.86 |
0.001842 |
7231.3 |
-0.006223 |
7/27/2010 |
282.99 |
0.00046 |
7249.8 |
0.0025556 |
7/28/2010 |
282.78 |
-0.00074 |
7220.3 |
-0.004072 |
7/29/2010 |
279.58 |
-0.01132 |
7235.1 |
0.0020525 |
7/30/2010 |
290.9 |
0.040489 |
7205.2 |
-0.004126 |
8/2/2010 |
304.68 |
0.04737 |
7284.3 |
0.0109781 |
8/3/2010 |
301.83 |
-0.00935 |
7300.4 |
0.0022075 |
8/4/2010 |
300.02 |
-0.006 |
7323.1 |
0.0031122 |
8/5/2010 |
293.97 |
-0.02017 |
7310.5 |
-0.001726 |
8/6/2010 |
306.88 |
0.043916 |
7304.6 |
-0.000802 |
8/9/2010 |
317.73 |
0.035356 |
7370.2 |
0.0089779 |
8/10/2010 |
311.33 |
-0.02014 |
7340.2 |
-0.004073 |
8/11/2010 |
311.33 |
0 |
7290 |
-0.006838 |
8/12/2010 |
310.86 |
-0.00151 |
7301.7 |
0.0016022 |
8/13/2010 |
312.72 |
0.005983 |
7349.2 |
0.0065054 |
Tata Chemicals- Market Index |
||||
Date |
Adj Close |
Return TATA Chem |
Adj Close |
Market Return BSE S&P 500 |
8/16/2010 |
331.25 |
0.059254 |
7314.4 |
-0.004738 |
8/17/2010 |
333.8 |
0.007698 |
7329.2 |
0.0020248 |
8/18/2010 |
347.07 |
0.039754 |
7400.7 |
0.0097583 |
8/19/2010 |
345.86 |
-0.00349 |
7473.7 |
0.0098694 |
8/20/2010 |
341.71 |
-0.012 |
7469.1 |
-0.000613 |
8/23/2010 |
350.48 |
0.025665 |
7497.1 |
0.0037461 |
8/24/2010 |
346.37 |
-0.01173 |
7452.8 |
-0.005917 |
8/25/2010 |
342.18 |
-0.0121 |
7381.8 |
-0.009516 |
8/26/2010 |
337.39 |
-0.014 |
7391.5 |
0.0013114 |
8/27/2010 |
329.52 |
-0.02333 |
7310.9 |
-0.010902 |
8/30/2010 |
334.84 |
0.016145 |
7321.4 |
0.0014239 |
8/31/2010 |
341.58 |
0.020129 |
7289.7 |
-0.004317 |
9/1/2010 |
341.97 |
0.001142 |
7394.1 |
0.0143215 |
9/2/2010 |
341.97 |
0 |
7423.2 |
0.0039247 |
9/3/2010 |
354.67 |
0.037138 |
7439.1 |
0.0021446 |
9/6/2010 |
361.8 |
0.020103 |
7559.3 |
0.0161659 |
9/7/2010 |
357.09 |
-0.01302 |
7586.8 |
0.0036339 |
9/8/2010 |
354.41 |
-0.00751 |
7596.4 |
0.0012601 |
9/9/2010 |
366.72 |
0.034734 |
7638.9 |
0.0055948 |
9/13/2010 |
370.96 |
0.011562 |
7767.5 |
0.0168454 |
9/14/2010 |
365.64 |
-0.01434 |
7791 |
0.0030152 |
9/15/2010 |
363.09 |
-0.00697 |
7842.1 |
0.0065678 |
9/16/2010 |
356.61 |
-0.01785 |
7796.6 |
-0.005807 |
9/17/2010 |
355.84 |
-0.00216 |
7881.8 |
0.010924 |
9/20/2010 |
359.38 |
0.009948 |
7979.1 |
0.0123449 |
9/21/2010 |
350.35 |
-0.02513 |
7975.1 |
-0.000503 |
9/22/2010 |
343.05 |
-0.02084 |
7949.2 |
-0.003244 |
9/23/2010 |
342.4 |
-0.00189 |
7918.3 |
-0.003885 |
9/24/2010 |
351.6 |
0.026869 |
7991.2 |
0.0092027 |
9/27/2010 |
354.37 |
0.007878 |
8019.3 |
0.0035138 |
9/28/2010 |
350.57 |
-0.01072 |
8021 |
0.000222 |
9/29/2010 |
345.12 |
-0.01555 |
7973.8 |
-0.005892 |
9/30/2010 |
344.69 |
-0.00125 |
7984.5 |
0.0013382 |
10/1/2010 |
346.68 |
0.005773 |
8135.2 |
0.0188842 |
10/4/2010 |
346.68 |
0 |
8169.8 |
0.0042445 |
10/5/2010 |
343.74 |
-0.00848 |
8178.5 |
0.0010637 |
10/6/2010 |
358.6 |
0.04323 |
8243.5 |
0.0079514 |
10/7/2010 |
355.62 |
-0.00831 |
8169.6 |
-0.008964 |
10/8/2010 |
354.54 |
-0.00304 |
8139.8 |
-0.003642 |
10/11/2010 |
365.04 |
0.029616 |
8188.9 |
0.0060235 |
10/12/2010 |
363.79 |
-0.00342 |
8131.5 |
-0.007005 |
10/13/2010 |
364.04 |
0.000687 |
8280.3 |
0.0182918 |
10/14/2010 |
375.41 |
0.031233 |
8220.3 |
-0.007244 |
10/15/2010 |
371.99 |
-0.00911 |
8086.4 |
-0.016291 |
10/18/2010 |
367.46 |
-0.01218 |
8089.2 |
0.0003549 |
10/19/2010 |
363.27 |
-0.0114 |
8044.4 |
-0.005536 |
10/20/2010 |
367.2 |
0.010818 |
8003.1 |
-0.005134 |
10/21/2010 |
373.12 |
0.016122 |
8141.4 |
0.0172807 |
10/22/2010 |
370.53 |
-0.00694 |
8119.1 |
-0.002749 |
10/25/2010 |
371.69 |
0.003131 |
8168.2 |
0.00605 |
10/26/2010 |
380.12 |
0.02268 |
8140.6 |
-0.003373 |
10/27/2010 |
378.65 |
-0.00387 |
8073.5 |
-0.00825 |
10/28/2010 |
368.62 |
-0.02649 |
8036.5 |
-0.004579 |
10/29/2010 |
337.17 |
-0.08532 |
8036.9 |
4.727E-05 |
11/1/2010 |
334.84 |
-0.00691 |
8164.9 |
0.0159241 |
11/2/2010 |
340.33 |
0.016396 |
8181 |
0.0019731 |
11/3/2010 |
352.21 |
0.034907 |
8228.8 |
0.0058427 |
11/4/2010 |
357.43 |
0.014821 |
8356.9 |
0.0155662 |
11/5/2010 |
358.73 |
0.003637 |
8405.1 |
0.005776 |
Tata Chemicals- Market Index |
||||
Date |
Adj Close |
Return TATA Chem |
Adj Close |
Market Return BSE S&P 500 |
11/8/2010 |
355.14 |
-0.01001 |
8369.5 |
-0.004243 |
11/9/2010 |
351 |
-0.01166 |
8405.7 |
0.0043241 |
11/10/2010 |
353.98 |
0.00849 |
8388.7 |
-0.002014 |
11/11/2010 |
347.32 |
-0.01881 |
8284.7 |
-0.012402 |
11/12/2010 |
339.37 |
-0.02289 |
8111 |
-0.020965 |
11/15/2010 |
333.72 |
-0.01665 |
8155.5 |
0.0054864 |
11/16/2010 |
325.98 |
-0.02319 |
7984.6 |
-0.020954 |
11/18/2010 |
328.31 |
0.007148 |
7988.5 |
0.0004934 |
11/19/2010 |
321.88 |
-0.01959 |
7844.1 |
-0.018082 |
11/22/2010 |
326.63 |
0.014757 |
7976.2 |
0.0168381 |
11/23/2010 |
328.57 |
0.005939 |
7883 |
-0.011686 |
11/24/2010 |
317.86 |
-0.0326 |
7788.8 |
-0.011951 |
11/25/2010 |
311.16 |
-0.02108 |
7679.1 |
-0.014074 |
11/26/2010 |
304.51 |
-0.02137 |
7552.1 |
-0.016542 |
11/29/2010 |
312.2 |
0.025254 |
7642.4 |
0.011949 |
11/30/2010 |
306.63 |
-0.01784 |
7722 |
0.0104287 |
12/1/2010 |
322.74 |
0.052539 |
7874.8 |
0.0197823 |
12/2/2010 |
319.07 |
-0.01137 |
7934.3 |
0.0075583 |
· Historical files of both share price and stock market index data with their rate of return.
Tata Chemicals, -10<0>+10 event period |
||||
Date |
Adj Close |
TATA Chem |
Adj Close |
BSE S&P 500 |
12/3/2010 |
312.98 |
-0.01909 |
7873.4 |
-0.007684 |
12/6/2010 |
311.33 |
-0.00527 |
7858.6 |
-0.001878 |
12/7/2010 |
311.33 |
0 |
7820.5 |
-0.004846 |
12/8/2010 |
306.8 |
-0.01455 |
7707.5 |
-0.014452 |
12/9/2010 |
300.06 |
-0.02197 |
7486.2 |
-0.028703 |
12/10/2010 |
307.06 |
0.023329 |
7605.2 |
0.0158864 |
12/13/2010 |
311.46 |
0.014329 |
7694.5 |
0.0117473 |
12/14/2010 |
321.53 |
0.032332 |
7756.4 |
0.008046 |
12/15/2010 |
315.96 |
-0.01732 |
7676.8 |
-0.010271 |
12/16/2010 |
320.71 |
0.015034 |
7732.5 |
0.007257 |
12/20/2010 |
322.18 |
0.004584 |
7727 |
-0.000711 |
12/21/2010 |
323.82 |
0.00509 |
7790.8 |
0.008262 |
12/22/2010 |
335.4 |
0.035761 |
7784.6 |
-0.000796 |
12/23/2010 |
339.63 |
0.012612 |
7769.4 |
-0.001953 |
12/24/2010 |
338.64 |
-0.00291 |
7798.8 |
0.0037777 |
12/27/2010 |
338.99 |
0.001034 |
7778 |
-0.002657 |
12/28/2010 |
338.99 |
0 |
7778.2 |
2.574E-05 |
12/29/2010 |
334.36 |
-0.01366 |
7849.5 |
0.0091602 |
12/30/2010 |
336.22 |
0.005563 |
7898.6 |
0.0062564 |
12/31/2010 |
340.33 |
0.012224 |
7961.1 |
0.007909 |
1/3/2011 |
349.23 |
0.026151 |
8001.5 |
0.0050772 |
· Historical files of both share price and stock market index data around the event date -10<0>+10with their return.
Tata Chemicals- British Salt |
|
SINGLE FACTOR MODEL |
|
INTERCEPT |
0.000485 |
SLOPE |
1.023755 |
R-SQUARE |
0.24052 |
STANDARD ERROR |
0.017513 |
Date |
[E] r |
AR |
AAR |
AR-t test |
Significance |
12/3/2010 |
-0.0074 |
-0.0117 |
-0.012 |
-0.6683 |
no |
12/6/2010 |
-0.0014 |
-0.0038 |
-0.016 |
-0.2189 |
no |
12/7/2010 |
-0.0045 |
0.0045 |
-0.011 |
0.2556 |
no |
12/8/2010 |
-0.0143 |
-0.0002 |
-0.011 |
-0.0137 |
no |
12/9/2010 |
-0.0289 |
0.0069 |
-0.004 |
0.3958 |
no |
12/10/2010 |
0.01675 |
0.0066 |
0.0022 |
0.3757 |
no |
12/13/2010 |
0.01251 |
0.0018 |
0.004 |
0.1038 |
no |
12/14/2010 |
0.00872 |
0.0236 |
0.0276 |
1.3481 |
no |
12/15/2010 |
-0.01 |
-0.0073 |
0.0203 |
-0.4164 |
no |
12/16/2010 |
0.00791 |
0.0071 |
0.0275 |
0.4065 |
no |
12/20/2010 |
-0.0002 |
0.0048 |
0.0323 |
0.2756 |
no |
12/21/2010 |
0.00894 |
-.0039 |
0.0284 |
-0.22 |
no |
12/22/2010 |
-0.0003 |
0.0361 |
0.0645 |
2.0608 |
yes |
12/23/2010 |
-0.0015 |
0.0141 |
0.0787 |
0.8066 |
no |
12/24/2010 |
0.00435 |
-0.0073 |
0.0714 |
-0.415 |
no |
12/27/2010 |
-0.0022 |
0.0033 |
0.0747 |
0.1866 |
no |
12/28/2010 |
0.00051 |
-0.0005 |
0.0741 |
-0.0292 |
no |
12/29/2010 |
0.00986 |
-0.0235 |
0.0506 |
-1.3431 |
no |
12/30/2010 |
0.00689 |
-0.0013 |
0.0493 |
-0.0758 |
no |
12/31/2010 |
0.00858 |
0.0036 |
0.0529 |
0.208 |
no |
1/3/2011 |
0.00568 |
0.0205 |
0.0734 |
1.1687 |
No |
CONCLUSION:
An event study methodology has been used to explore the short-term shareholder wealth of the Tata Chemicals around the event date i. e. 20th Dec. 2010. The merger of the British Salt with the Tata Chemicals has been studied. This is the first study of stock market valuation and estimation of abnormal returns in the context of Indian mergers. The results document positive on the date of merger but not significant. This event increase in the value to the shareholders of bidder firm. The findings of the study are positive. It emerges that global merger announcement in the Indian industry has positive and significant shareholders wealth effect for the bidder and firm.
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Research J. Humanities and Social Sciences. 8(4): October -December, 2017, 451-458.
DOI: 10.5958/2321-5828.2017.00066.3
Received on 23.08.2017
Modified on 19.09.2017
Accepted on 22.10.2017
© A&V Publications all right reserved