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You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company.​...

You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company.​ UnderWater's stock price is $ 23 and it has 2.75 million shares outstanding. You believe that if you buy the company and replace its​ management, its value will increase by 42 %. You are planning on doing a leveraged buyout of UnderWater and will offer $ 28.75 per share for control of the company. a. Assuming you get​ 50% control, what will happen to the price of​ non-tendered shares? b. Given the answer in part ​(a​), will shareholders tender their​ shares, not tender their​ shares, or be​ indifferent? c. What will your gain from the transaction​ be?

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Expert Solution

Gain from the transaction will be = $ 5.37625 million

jeff jeffy answered 1 year ago
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