Question
A firm has 1,000,000 shares outstanding. An activist investor acquires 12% of the firm's 1,000,000 shares outstanding. The current share price is $28.88 per share.
A firm has 1,000,000 shares outstanding. An activist investor acquires 12% of the firm's 1,000,000 shares outstanding. The current share price is $28.88 per share. The CEO does an exclusionary self tender offer by offering all shareholders other than the activist investor a 32% premium for 23% of the non-activist shares. Assume that all non-activist shareholders take advantage of this exclusionary self tender offer.
1. Due to the exclusionary self tender, what is the activist investor's change in wealth?
2. Due to the exclusionary self tender, what is the total collective change in wealth to non-activist investors?
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International Financial Management
Authors: Jeff Madura
7th Edition
0324071744, 978-0324071740
