Case: Dow’s Bid for Rohm and Haas

Our assumptions and calculations leading up to these valuations are outlined in our exhibits 1 through 5.

However, a stock drop in the U.S. market is not historically unusual for impending mergers. So, all things considered, it looked like this might be a great combination.

According to our calculations Cooper Copper has an optimum bargaining position because they can offer up to $60.13 (at a 4% growth estimated rate) for it’s the stock in order to acquire the majority its shares. Porter 's offer of $42.00 per share failed to get the majority of shares need to acquire control. VLN 's offered to honor the price of $53.10 for preferred shares. This is the share value that speculators and stockholders would hope to obtain although the actual offer could end up to be much less. According to our calculations and analysis the best possible offer Copper can offer up to $60.13 (at a 4% growth estimated rate) per share for Nicholson stock.

Paulson E. (2001). “Inside Cisco: The real story of sustained M&A growth”, John Wiley & Sons, Inc.

Question 1 Several factors have been proposed as providing a rationale for mergers. Among the more prominent ones are (1) tax considerations, (2) diversification, (3)

4. Based on the scenarios in Ex. 81, and on your assessment of the optimal amount of debt to be used in Seagate's capital structure, how much are Seagate's operating assets worth? Assume that of the $765 million in cash that the buyout team will acquire as part of the transaction, $500 million is required for new investment in net working capital and $265 million is excess cash. Also, assume that the buyout team plans to pay down its debt as cash flows permit during the forecast period. Estimate the value of Seagate's operating assets under the following two scenarios:

At the beginning the offer was a reaction to the CSX bid; then other factors came into play, such as time, the time span until the vote of the shareholders, the legal procedure (since the judge ruled against Norfolk Southern). Secondly, the outcome of this process will determine the future development of the companies involved. The merged companies, the winners, will survive, whereas the loser will disappear from the market. Based on this fact we might assume that each

The company entered into dubious transactions, especially with Doug Mather. This helped contribute to the cash flow problems. The company needs to avoid these transactions in the future.

Synopsis: Dow is acquiring Rohm and Haas from Ingersoll-Rand at an agreed price per share of $78. However, a deal with Kuwait’s Petrochemical Industries Company, which was supposed to generate $7 billion of cash to be used to finance the acquisition, had recently fell-through. The hiccup has led to Rohm taking legal action to force Dow to complete the acquisition as required by the merger agreement. The standalone value of Rohm’s share price is currently at $46.77 while the synergies could almost double that to $94.63 per share. By going ahead with the deal Dow would need to raise capital and that might lead to a lower bond rating.

However, there has been present a considerable cyclicality in the Chemical Industrial Products manufacturing industry due to which the M&A deals have been a common tool of survival for the competitors as well as for the big players to capture the integrated products markets and create value across the value chain. Therefore, Blackstone has been valuing a backward integration as a due.

The $55 value is on the lower range of the analyst eztimates, with a best guess estimate of $67.94. Since the value of the stock had been below $45 for 4 months, the offer of 55 dollars represented a 29% premium to investors. Bollenbach knew that management would be resistant of any attempt to be acquired, regardless of price, because of failed previous attempts to negotiate a friendly merger at year end 1996. The 55-dollar benchmark created an expectation for ITT management to achieve that level, or higher and the premium is enough to demonstrate to investors it is a real offer. Their support will be key as they will have a

7. The merit of paying by stock is it does not need to increase company’s debt and would not cause any liquidation issues. On the other hand, paying by cash is a quicker way than by stock. It would not cause earnings dilution and ownership loss. Moreover, paying by cash can produce tax shield to the company. In this case, FAHZ held 88.1% of Antarctica’s voting common stock and it was exempt from taxation. Besides, delays in the process may threaten the survival of Antarctic. So FAHZ preferred a cash offer. On the other hand, Brahma’s stock price might be undervalued, so the amount of consideration to be paid may change depend on the form of payment.

The General Electric (GE) and Honeywell International (HI) case illustrates the complexities of structuring mergers and acquisitions when the combined firms are capable of exerting market influence that threatens the competitive landscape. While General Electric's CEO, Jack Welch, characterized the deal as, "This is the cleanest deal you'll ever see," European anti-trust regulators were not so inclined to view the transaction as harmless to competition (Elliot, 2001).

3. What risks do AT&T and McCaw face in this proposed merger? Consider a range of transactional, financial and operating risks. What effect do these risk factors have on the value of McCaw?

Doing these acquisitions at some certain stages were important to diversify GE technologies and maximize its market share (Immelt, 2005), however, the balancing between growing organically by empowering the company from within and acquiring some companies is even more important for setting up the company directions. Since more than half of the company revenue is derived from its financial services (Company Data 2008), this brings the argument onto the table about the nature of the company making it a financial company with a manufacturing arm.