Valuing Sify's Acquisition of Indiaworld

Sify completed the second phase of the acquisition of IndiaWorld on June 30, 2000, by modifying the option agreement entered in November 1999. The revised agreement changed the acquisition from an all cash transaction to a cash plus stock deal.

Sify settled the final payment of Rs. 3.25 billion by making a payment of Rs. 2.15 billion in cash and issuing 2,68,500 fresh equity shares of Sify worth Rs. 1.10 billion. Hence, in the deal each equity share of Sify was valued at Rs. 4097. The equity shares issued under the deal were neither listed in India nor could be converted into ADSs according to the law during that time...

Some of the experts felt that the value of a company varied depending on the buyer. For example, a strategic buyer could be willing to pay a higher price for a company compared to a financial buyer. Analysts argued that the acquisition of IndiaWorld by Sify was made with a strategic objective.

They said that IndiaWorld would be a perfect complement to Sify's website. The deal would allow Sify to exploit cross-selling opportunities within its own portal and ISP service and ready access to the existing customer base and content of IndiaWorld's portal. Moreover, IndiaWorld was the second largest portal in India in 1999 and enjoyed good brand equity...