Assuming you get 50 control what will happen to the price


You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company. UnderWater's stock price is $ 21 and it has 1.25 million shares outstanding. You believe that if you buy the company and replace its management, its value will increase by 36 %. You are planning on doing a leveraged buyout of UnderWater and will offer $ 26.25 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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Financial Management: Assuming you get 50 control what will happen to the price
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