/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q12DQ. What is the purpose(s) of the tw... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 5: Q12DQ. (page 648)

What is the purpose(s) of the two-step buyout from the viewpoint of the acquiring company?

Short Answer

Expert verified

To provide strong inducement to stockholders and pay the lower total price by the acquirer if a single offer is made.

Step by step solution

01

Explanation on two-step buyout

A two-step buyout is a purchasing plan in which acquiring company offers a higher price for 51% of the share outstanding, and also offers a second option of the lower price, which will be paid in the future by cash, shares, or bonds.

02

Purpose of two-step buyout

The purpose of a two-step buyout is as follows:

  • It induces stockholders to react to the offer made. If the stockholders do not take immediate action, they will have to accept a lower price.

Acquiring company can pay a lower price compared to a single offer.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The Hollings Corporation is considering a two-step buyout of the Norton Corporation. The latter firm has 2.5 million shares outstanding and its stock price is currently \(40 per share. In the two-step buyout, Hollings will offer to buy 51 percent of Norton鈥檚 shares outstanding for \)62 per share in cash and the balance in a second offer of 840,000 convertible preferred stock shares. Each share of preferred stock would be valued at 40 percent over the current value of Norton鈥檚 common stock. Mr. Green, a newcomer to the management team at Hollings, suggests that only one offer for all Norton鈥檚 shares be made at $59.25 per share. Compare the total costs of the two alternatives. Which is better in terms of minimizing costs?

If a firm wishes to achieve immediate appreciation in earnings per share as a result of a merger, how can this be best accomplished in terms of exchange variables? What is a possible drawback to this approach in terms of long-range considerations?

What procedures would you recommend for a multinational company in studying exposure to political risk? What actual strategies can be used to guard against such risk?

What is LIBOR? How does it compare to the U.S. prime rate?

A Peruvian investor buys 150 shares of a U.S. stock for \(7,500 (\)50 per share). Over a year, the stock goes up by \(4 per share.

  1. If there is a 10 percent gain in the value of the dollar versus the Peruvian nuevo sol, what will be the total percentage return to the Peruvian investor? First, determine the new dollar value of the investment and multiply this figure by 1.10. Divide this answer by \)7,500 and get a percentage value, and then subtract 100 percent to get the percentage return.
  2. Instead assume that the stock increases by $7, but that the dollar decreases by 10 percent versus the nuevo sol. What will be the total percentage return to the Peruvian investor? Use 0.90 in place of 1.10 in this case.
See all solutions

Recommended explanations on Business Studies Textbooks

Nature of Business

Read Explanation

Managers

Read Explanation

Strategic Direction

Read Explanation

Influences On Business

Read Explanation

Business Case Studies

Read Explanation

Project Planning & Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.