In the original version of the case, the New Haven Planet and the Hartford Gazette were contemplating a merger. The Planet has a market cap of $$10$m$,$ while the Gazette has a market cap of $$22$m$.$ Because of cost savings and expanded readership, the two firms together would have a market cap of $$41\mathrm{.}85$ million, which is $$9\mathrm{.}85$ million more than their individual valuations combined.

To keep things simple, we will think of the Gazette as the buyer and the Planet as the seller. Thus the Gazette is willing to pay as much as $$19\mathrm{.}85$m and the Planet is willing to sell for anything above $$10$m$.$ Absent any other bidders, we expect the two parties to settle on a price that splits the gains $($or pie$)$ evenly.

In this version of the case, we add a new player, the Stamford Sun, as a second potential buyer for the Planet. The Sun is willing to pay up to $$18$ million for the Planet. $($The Sun can create synergies, but not quite as much as the Gazette.$)$

Assume all three players in this negotiation are fully aware of all these numbers. Thus the Planet knows the Gazette is willing to pay up to $$19\mathrm{.}85$m and the Sun is willing to pay up to $$18$m$.$ Similarly, the Gazette and the Sun know each other$$s valuations as well as the Planet$$s current market value of $$10$m$.$

Based on the relatively small size of these papers, you should also assume there are no other potential merger partners. No joint ventures are possible. The Planet will reach a deal with either the Gazette or the Sun. If neither deal is reached, then all three parties continue with their business as usual and none of the synergies are achieved.

Note: The Sun has no interest in purchasing the Gazette $($or vice versa$),$ and there is no potential for all three papers to combine. Below is a recap of the relevant numbers:

Planet alone

$$10$m

Gazette alone

$$22$m

Planet $+$ Gazette

$$41\mathrm{.}85$m

Total Synergy of Planet$$Gazette merger

$$9\mathrm{.}85$m

Most Gazette will pay for Planet

$$19\mathrm{.}85$m

Total Synergy of Planet$$Sun merger

$$8$m

Most Sun will pay for Planet

$$18$m

Given the presence of this additional bidder, what price should the Planet get?

$1$ point

$$14\mathrm{.}925$m $($the same as before$)$

$$18$m $($$$3\mathrm{.}075$m more$)$

$$18\mathrm{.}925$m $($$$4$m more$)$

$$19\mathrm{.}85$m $($$$4\mathrm{.}925$m more$)$

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