estimate the total synergies, Financial Accounting

Dietz&Dow Industries (DDI) makes an unexpected takeover bid for Hein & Hillgen Instruments (HHI). DDI offers to pay $50 per share of HHI, which represents a 25% premium over the prior day's closing price of HHI of $40. Upon announcement of the bid, the share price of HHI rises to about $50, while the share price of BBI increases from $25 to $27. Currently, DDI has 400 million shares outstanding, whereas HHI has 100 million shares outstanding.

(a)    Does the market believe that the acquisition would be a positive NPV project for the shareholders of DDI? Explain your reasoning.

(b)   Estimate the total synergies that the market believes are created by this merger. Which company captures most of the synergies? Show your calculations.

(c)    A week after the takeover offer from DDI, rumors hit the market that a third company might enter the bidding contest. In response HHI's share price increases to $55, and DDI's CFO is considering modifying its bid for HHI. What is the maximum price per share that DDI can prudently bid? Explain fully.

 (d)   When a day later a third party, Laor & Levick International, indeed enters the bidding contest and offers $60 per share for HHI, shares of DDI drop to $24 upon the announcement. Give two explanations as to why DDI's share price might drop. 

 

 

Posted Date: 2/28/2013 12:13:52 AM | Location : United States







Related Discussions:- estimate the total synergies, Assignment Help, Ask Question on estimate the total synergies, Get Answer, Expert's Help, estimate the total synergies Discussions

Write discussion on estimate the total synergies
Your posts are moderated
Related Questions
Tyler Smith has worked in an upholstery shop for 10 years. Tyler's wages were $20,000. Lately, Tyler has been unhappy with the shop's owner. Convinced that he could run an upholste

Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units: Direct materials $ 900 Direct labor 360 Manufacturing overhead* 6

The purchase of a car needs a $23,410 loan to be repaid in monthly installments for 4years at 12% annual real interest rate. If annual inflation rate is 4%, find the extra amount t

What points is necessary to meet users requirements To meet these users' requirements, it can be argued that accounting information must possess certain key qualities, or chara

Silva and Juanita Rodriquez are the owners of Year-Round Landscape, Inc., a small landscape and yard service business in southern California. The business is three years old and ha

Can you do the attacched quections by Monday?

During its financial year ended 30 June 20x7 Beavers Ltd, an engineering company, has worked on several contracts. Information relating to one of them is given below.

You are preparing and income statement and analysis of retained earnings for Pacioli Wholesale Corporation for the years ended June 30, 2011 and 2012 based on the following informa

You are evaluating a project which costs $720,000, has a four-year life, and no salvage value. Depreciation is straight-line and the half year rule does not apply. Sales are projec

On January 1, 2013, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each NewTune''s shares has a $4 par value and a