Assignment
Case Study: Martin Marietta - VulcanMerger
This "mini-case" is based on anactual deal and we will use it to illustrate an overview of a merger. Your case report should address the following questions, but you are encouraged to include your thoughts on other issues. You can find the information for analyzing these questions from online sources. (Some examples are provided.) The deliverables for the case include 1) a case report for all teams and 2) a presentation from the presenting teams.
1. What is the motivation for Martin Marietta's bid for Vulcan?
2. According to Martin Marietta management, how much synergy will this merger potentially create?From what sources?Estimate the present value of thesynergy(after-tax)described above.
3. According to Vulcan, how much synergy will this merger potentially create? From what sources? Estimate the present value of thesynergy (after-tax) described above.
4. On what day was the bid first announced to the public? Was it before or after market close? Was there rumor about the deal before formal announcement? How would such rumor affect the market?
5. Analyst often calculate the abnormal stock returns around merger announcement to estimate the value creation (or destruction) of a merger.
- Abnormal stock return = Stock return - Market return (during the same time period)
If you were given this task, over which time period would you choose to calculate the abnormal stock returns? Plot the daily stock prices for both Martin Marietta and Vulcan on a graph over this time period. Also calculate the abnormal stock returns during this period. What inferences can you draw from the graph and returns?
6. What is the takeover premium Martin Marietta offer to Vulcan? Calculate the dollar value of the premium and compare it to the PV of synergies. Do you believe that Vulcan shareholders receive their fair share of the potential synergies?
7. Using the abnormal stock return you calculate above, estimate the total dollar change to the two companies' equity value. Are these numbers consistent with the present value of the synergy that the management predicted? What do you learn from these numbers?
8. After the merger announcement, what was Vulcan's stock price? How does it compare to the acquisition price Martin Mariettaoffered?How do you explain the discrepancy between the two prices?
9. What are the abnormal stock returns for Cemex, Lafarge, CRH, and building materials companies? What do you learn from these findings?
10. Vulcan's board has advised their shareholders to reject the takeover bid. If you were an advisor to Martin Marietta, what other actions would you recommend Martin Marietta to take?
11. If you were a shareholder of Vulcan, would you tender your shares to Martin Marietta?
12. How did the hostile bid end? What lesson do you learn from the outcome?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.