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Assume: Volatility = 25% for Hilton and Starwood, r = 6%, S(HLT)=31.81 (price on 10/31: $30.81; the text on the stock valuation of $27.73 refers to this price and can be ignored), S(HOT) = $52.10 (down from $54.25 on 10/31, and from $57.263 earlier). Both market prices given here are after the transaction is announced. They incorporate the information about the value of the transaction including the value synergy and the derivatives offered. No dividend is paid on these stocks. Assume that ITT SHs vote is expected 60 days from now. If Starwood's offer is supported, the deal will be completed 20 days after that, and on that day Starwood will pay for the deal. If Hilton's offer is supported, the merger is completed 10 days after SHs' vote. Then, and cash part will be paid and the count for the contingent value stock begins. The stock portion + one CVR against each share of Hilton that is given will be paid 90 days after cash is paid. The year has 365 days. Assume for simplicity that for each bidder, the transaction is certain to go through. Use post-announcement prices. Assume no transaction costs. Calculate the value of each offer. TT Bid to About $9.3 Billion WSZ 4/3/97 Comparing Two Deals for ITT HILTON Stock STARWOOD/IIT $15 a share. $67 a share in Starwood stock, so long as Starwood stock stays-within $4 of $57.263. Cash $80 a share for 55%, or $44 a share in cash. Two shares of Hilton for one ITT, for the remain- ing 45%, or about $27.73 a share in stock. Plus, contingent-value stock if Hilton trades below $40 a share one year after merger, maximum pay- ment in cash or stock of $12. Closing Cash paid one to two weeks after ITT shareholder vote. Stock portion 60 to 90 days thereafter. Synergies $115 million. Estimates made by bidders. Actual clasing wii depan Moved up to January-February from end of first quarter. $100 million. Eshmokes mode by biddes, Actual closing will depend on regulatory appraids, Assume: Volatility = 25% for Hilton and Starwood, r = 6%, S(HLT)=31.81 (price on 10/31: $30.81; the text on the stock valuation of $27.73 refers to this price and can be ignored), S(HOT) = $52.10 (down from $54.25 on 10/31, and from $57.263 earlier). Both market prices given here are after the transaction is announced. They incorporate the information about the value of the transaction including the value synergy and the derivatives offered. No dividend is paid on these stocks. Assume that ITT SHs vote is expected 60 days from now. If Starwood's offer is supported, the deal will be completed 20 days after that, and on that day Starwood will pay for the deal. If Hilton's offer is supported, the merger is completed 10 days after SHs' vote. Then, and cash part will be paid and the count for the contingent value stock begins. The stock portion + one CVR against each share of Hilton that is given will be paid 90 days after cash is paid. The year has 365 days. Assume for simplicity that for each bidder, the transaction is certain to go through. Use post-announcement prices. Assume no transaction costs. Calculate the value of each offer. TT Bid to About $9.3 Billion WSZ 4/3/97 Comparing Two Deals for ITT HILTON Stock STARWOOD/IIT $15 a share. $67 a share in Starwood stock, so long as Starwood stock stays-within $4 of $57.263. Cash $80 a share for 55%, or $44 a share in cash. Two shares of Hilton for one ITT, for the remain- ing 45%, or about $27.73 a share in stock. Plus, contingent-value stock if Hilton trades below $40 a share one year after merger, maximum pay- ment in cash or stock of $12. Closing Cash paid one to two weeks after ITT shareholder vote. Stock portion 60 to 90 days thereafter. Synergies $115 million. Estimates made by bidders. Actual clasing wii depan Moved up to January-February from end of first quarter. $100 million. Eshmokes mode by biddes, Actual closing will depend on regulatory appraids