Question: The Hollings Corporation is considering a two-step buyout of the Norton Corporation. The latter firm has 2 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's shares outstanding for $68 per share in cash, and the balance in a second offer of 980,000 convertible preferred stock shares. Each share of preferred stock would be valued at 45 percent over the current value of Norton's common stock. Mr. Green, a newcomer to the management team at Hollings, suggests that only one offer for all Norton's shares be made at $65.25 per share. Compare the total costs of the two alternatives. Which is better in terms of minimizing costs?