Interface Corporation is a manufacturer of wearable fitness devices. It is being targeted by Home Gym Direct Inc, a larger home fitness manufacturer with also a small presence in the wearable fitness device market. The board of Home Gym Direct wants to propose a friendly takeover with the bid valued at $100 million to Interface's board. This is based on an assessment that revenue synergies will be insignificant, but the manufacturing costs forInterface's devices will fall by $8 million a year because of Home Gym Direct's purchasing power. The information below is the forecast Interface's financial year-end performance (one year from now) as a standalone firm, all in $ million:

Revenue: $110

Cost of goods sold and operating expenses: $98

Depreciation: $5

Annual CAPEX: $3

Change in networking capital: $4

Interface currently has no debt and has a discount rate of 12%. The industry (including both companies) is forecast to grow at a 2.5%. Assuming a tax rate of 35% and merger integration costs of $10 million, is $100 million an appropriate first bid? What takeover premium would the $100 million bid represent? If you were a consultant, how would you advise the board of Home Gym Direct on setting its initial bid value? Explain the rationales behind your advice. Make any other assumptions that you think are necessary.

Please explain