1. Determine the amount Jackson Enterprises is willing to pay in terms of goodwill. 2. If JEs...

1. Determine the amount Jackson Enterprises is willing to pay in terms of goodwill.

2. If JE’s shares are currently trading at $62.43, then how many shares should JE offer for every share of MSI?

3. Assuming that MSI will be treated as a separate reporting subsidiary following the merger, develop the balance sheet for the subsidiary.

4. Calculate the Herfindahl–Hirschman Index for the industry both before and after the pro-posed merger.

Jackson Enterprises (JE) is offering a 25% takeover premium to Michael Studios, Inc. (MSI) for the firm’s 2 million outstanding shares, which are currently trading for a pre-offer price of $20 per share.

The balance sheet for MSI is:

The market value of MSI’s fixed assets is $60,000,000.
The sales (in millions) for the industry by company are:
Sales
ABC ......... $89
CWC .........66
DEF ...........35
JE ...........45
KOJ ...........42
MSI ...........18
SEE ...........76

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Assets Liabilities Curent $15,000,000 Fixed Total Current Long-tem Total Owner's equity Total liabilities and equity S 7,500,000 25.000.000 $32,500,000 27.500.000 $60,000,000 45.000.000 S60,000,000