User Account

All Pages

Mergers and Acquisitions , Corporate Finance

Assignment Help:
a) Cookie Monster Inc. (a $15 billion snack food company) is considering acquiring Keebler Elves but is unsure of how much is should be willing to pay for the target firm. At the moment, Keebler''s 44 million shares are trading in the market for $67.54 but Cookie Monster''s managers are convinced that its managers could tease out more value from their operations. Specifically, they expect to be able to decrease corporate overhead and thus increase the growth rate of Keebler''s dividends by 1% per year. In order to capture these gains, Cookie Monster will also have to incur $65 million worth of after-tax restructuring costs at the end of the first year and another $40 million (after-tax) at the end of year 2. Keebler''s dividend this year was $3.80 and the appropriate discount rate is 13%. Assuming they can purchase the company for its current share price, how much would the Keebler acquisition be worth to Cookie Monster?

b) After consulting with their investment bankers, Cookie Monster''s managers believe they will need to offer Keebler''s shareholders a 10% premium above its current market price in order to secure its sale. Furthermore, there is some uncertainty about how successful the integration of the new firm will be with the worst case scenario (20% chance of occurring) resulting in no change in Keebler''s dividend growth. Assuming a 100% cash deal, what is the maximum loss Cookie''s shareholders can incur?

c) If Cookie Monster instead offers Keebler a 15% premium on its current price but the deal offers them new shares in Cookie Monster instead of cash, what is the maximum loss Cookie''s shareholders original shareholders can incur?

Related Discussions:- Mergers and Acquisitions

Replacement decisions , Your boss is trying to figure out when to replace a...

Your boss is trying to figure out when to replace an important piece of machinery in your main production facility.  The Siemens NR550, costs $5.45 million brand new and generally

Dividend policy, the managing directors of three profitable listed companie...

the managing directors of three profitable listed companies discussed their company''s dividend policies. company A has deliberately paid no dividends for the past five years. comp

Capital Expenditure Decisions and Investment Criteria, Question 1: Capital ...

Question 1: Capital Expenditure Decisions and Investment Criteria (30 MARKS) In recent years Morten Ltd, a company that manufactures and markets a range of p

What are "in-market" mergers, What are "in-market" mergers? A: An in-ma...

What are "in-market" mergers? A: An in-market merger is one that takes place between two banks operating in the same geographic area, typically a city or metropolitan area. The

Advantages and disadvantages of overdraft, A factoring company has offered ...

A factoring company has offered a one-year agreement with Glub Ltd to both manage its debtors and advanced 80 per cent of the value of all its invoices immediately a sale is invoi

Mergers and Acquisition, #queM&A E-III Corp. is investigating the possible ...

#queM&A E-III Corp. is investigating the possible acquisition of Silicon Inc. Assume that both firms have no debt outstanding. E-III Corp. Silicon Inc. Pre-announcement stock price

Describe the different types of exchange rate risks, a) Describe the diffe...

a) Describe the different types of exchange rate risks, using appropriate numerical examples. b) ‘Transaction exposure will equally be managed externally by a forward hedge or

Purchase the machine outlaright, calculate pv

calculate pv

Risk-return relationship, Problem 1 What is a bill of exchange? Explain...

Problem 1 What is a bill of exchange? Explain carefully the requisites for a bill of exchange to be valid.  Problem 2 You have a close friend, Peter, who is a renowned

Capital structure, What the implications of the pecking order theory?

What the implications of the pecking order theory?

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd