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
Q. What is Stock Split? Stock Split - Increase in number of shares of a company's COMMON STOCK outstanding that result from the issuance of additional shares proportionally to

In actual life cash flows occurring above a period of time are frequently uneven. For illustration, the dividends declared through the companies will change from year to year, as s

Question: Mada Air Ltd is thinking of diversifying its activities in order to cope with the financial crisis. After careful evaluation its research and development team has pro

Common stocks A, B, C, and D had the following quarterly returns. A B C D 0.07 0.05 0.07 0.12

The common stock of the CC Corporation has been trading in a narrow price range of around $50 for months, and you are convinced it is going to stay in that range for the next 3 mon

Q. Show Calculation of project net present value? Sensitivity of NPV to sales volume Sales volume giving zero NPV = ((50000/3·605) + 10000)/1·35 = 17681 units This i

1) The detailed information is on the second tab marked "Financials". Enter summarized Balance Sheet and Income Statement information for Cummins into the template on the "Summary

Accounting Date In determining the accounting date of the trust, the trustees will consider the following: Date of death (accounts to anniversary of death); Fiscal y

Cleaning Co. began business on March 1, 2011. The company provides specialized cleaning services to corporate clients. Listed below are the transactions entered into by Cleaning Co

Alta Velocidad Esperanza de L'Argentina, Sociedad Anónima (AVE), a high-speed railway operator domiciled in Rio Norte, Argentina, is a Foreign Private Issuer as defined by the U.S.