A raider is planning to acquire Bowman, a firm with 20 million shares outstanding and a current share price of 6.25. The raider believes that following the acquisition these shares would be worth 8.10 each. The cost of the takeover bid would be 3 million and the premium offered to Bowman's shareholders would be 1.25 per share. (i) Following the logic of the Grossman and Hart (1980) analysis of the free rider problem, can the raider make a profitable takeover bid? Explain your answer. (6 marks) (ii) If the raider is able to accumulate 1.5 million shares before making their bid, does this change your conclusion? (4 marks) (b) 'Conglomerate' mergers may occur without any evident financial or strategic justification. What possible motivations exist for such mergers? (5 marks) (c) Why might managers of a target firm resist a value-enhancing takeover from another firm? Suggest and briefly discuss three strategies that the managers of a target firm might use to defend against a possible takeover bid. (10 marks) (Total 25 marks)