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In: Accounting

Acquiror A wants to purchase 80% of Target B’s voting shares. Let’s say that Target B...

Acquiror A wants to purchase 80% of Target B’s voting shares. Let’s say that Target B has 100 voting shares; current market price is equal to $10/share; number of shareholders is 100. In order to attract Target B’s shareholders, Acquiror A offers Target B’s shareholders $15/share. -

How much will it cost Acquiror A to purchase the # of Target B’s shares that it wishes to purchase? _______________________________________________________ (please show your calculation in answer)

BUT, Poison Pill: Target B has implemented a poison pill in response to this hostile takeover attempt. Target B offers each of its shareholders the opportunity to purchase 5 additional shares of Target B voting stock at $5/share (and all shareholders decide to take the deal and each purchase 5 additional shares at that price). How many shares of voting stock will Target B have outstanding after its shareholders purchase these additional shares under the poison pill_________________________(please show your calculation in answer)

After the poison pill, how much will it cost Acquiror A to purchase the # of Target B’s shares that it wants to purchase? ______________(please show your calculation in answer) -

BONUS POINT: What are any possible ramifications (i.e. consequences, positive and/or negative), of Target B’s poison pill plan?________________________________________________. ***

Solutions

Expert Solution

Poison pill is the defence strategy used by target firm against the acquirer firm. its generally had adverse effect on shareholders value.

ekkarill92 answered 2 years ago
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