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
Choose a share from a market such as LSE, NYSE, NASDAQ, etc. [Data sources could be Datastream, Google Finance or others]. Prepare a report which involves the following aspects: -

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company mon

Describe the following questions:- Q.1 Explain how financial statements assist in the capital allocation process. How are financial statements limited? Which financial statement

Limited Liability Partnership (LLP) - GENERAL PARTNERSHIP which, via registration with an appropriate state authority, is able to enshroud all its partners in limited liability. Ru

A summary of management oriented activity ratio are specified below. It describes the ratios and also their major purposes. Activity Ratios (Secondary Group) The numer

The capital structure of Wild West Inc. is as follows: -     Debts: $5,000,000 (face value) bonds with coupon rate at 8.00% and current price at par -      Preferred shares:

is net sales an asset

Calculate  Stock turnover rate The total average number of times each year which stocks is "turned over" in the terms and course of trading activity. Stock turnover rate

Notice an Rs.50, 000 investment in a one year fixed deposit and rolled over yearly for the subsequently two years.  The interest rate for the primary year is 5 percent  yearly and

Real estate depreciated under MACRS rules is subject to cost recovery using a mid-year convention. Mike converted his personal residence (acquired in 2001) to rental property th