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The value of the gains that Ciba saw in the takeover of Allied Colloids was based on financial reporting, improving product performance as well as increasing value for their shareholders

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´╗┐Ciba Specialty Chemical?s Case Analysis Adam Ching 10/25/12 Fin 139 1.) What caused Allied Colloids to become a takeover target? On March 12th 1998 Ciba Specialty Chemicals (SC) announced its acquisition of Allied Colloids, a company known as a global leader in water treatment. Allied Colloids acquisition aligned with Ciba?s goals in the form of establishing a new pillar for profitable and sustainable growth in the area of water treatment additives. Being the ambitious company that Ciba was, they realized that Allied Colloids could be the platform they had been looking for. This would allow them to enter the water treatment market due to Allied Colloids established global market position and strong technological developments. Allied Colloids was more than just a water treatment company. The company consisted of five divisions, water treatment, additives, colors, customer care, and performance polymers. With its diversification of processes, and an entry into a high potential market, it was easy to see why Allied Colloids was the target within Ciba?s sights. 2.) How did Ciba value the gains from the merger or acquisition? The value of the gains that Ciba saw in the takeover of Allied Colloids was based on financial reporting, improving product performance as well as increasing value for their shareholders. ...read more.


This effect was due to difficult market conditions, and it was in the second half of 1998 that the company saw the full financing costs related to the acquisition of Allied Colloids. Sales from 1997 steadily increased each year until 1999. During the end of 1999, Ciba signed an agreement with Morgan Greenfield Private Equity who intended to buy the Performance Polymers business. Due to this business transaction the company?s financial statement shows a decline in sales from 1999 to 2000 of almost one billion. This can be deceiving since Ciba?s net income rose slightly over 28% from 325 million to 452 million. When looking at Ciba?s financial statements, we can see that the company took a pretty big hit in 1998. Since then, the company has made a strong and steady climb in the right direction. In the case of Owners Equity this is no different. Looking at the chart below that illustrates O/E along with sales and net income, we can see that for the most part, the company has looked very strong since 1998 in sales, net income, and equity. Ciba Sales NI Equity 1997 7,822 293 4,336 1998 8,423 -739 3,293 1999 8,972 325 3,685 2000 7,902 452 3,754 2001 7,367 382 3,908 2002 7,085 406 4,354 2003 ...read more.


If Hercules was to purchase Allied Colloids, they feared large job losses were inevitable. If I were to determine a clear loser out of all of this it would have to be Hercules. Not only did they lose out on the technological benefits that were paramount within Allied Colloids, but Hercules calculated if they were to acquire Allied Colloids they would save 200 million a year in costs in addition to other benefits. 5.Post-script: Search online and provide a brief post script of the case since the acquisition. Your answers to questions 1-4 must be independent of your answer to question 5. Your answer to this question may contradict your answers to 1-4 above. In recent years Ciba, the acquirer or Allied Colloids, has been acquired itself. The purchasing company is the world?s biggest chemical group known as BASF who finalized the deal in 2009. Ciba?s downfall had been its lack of backward integration which led to margin erosion. Ciba and BASF?s board of directors reached an agreement in which all parties agreed on the merger. The transaction was finalized early April 2009 at a price of 6.1 billion Swiss Franc?s or about $5.5 billion. This result was surprising considering Ciba?s strength and growth in the late 1990?s and early 2000?s. ...read more.

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