Problem 1 Sberbank closed a deal with the shareholders of Kapital Kredit to buy the company at 1.400 Rubles per share. The management of Kapital Kredit did not approve of the take-over as they will be made redundant after the acquisition. Below you find the data the analysts of Barclays gathered during the M&A process: Sberbank: Sberbank Kapital Kredit Book Value of equity Book Value of liabilities 500.000.000 P 750.000.000 P Number of shares 260.000 250.000 Stock price 2.500 P 1.000 P Market Value of equity Market Value of liabilities 650.000.000 P 650.000.000 P Market Value of equity 650.000.000 P 250.000.000 P a) Is it a friendly or a hostile take-over? b) How would you advise the management of Sberbank to pay for the deal: through a stock swap or in cash? Explain why. c) Suppose the management of Sberbank prefers a stock swap as it is short of cash. How many new shares need to be issued by Sberbank to pay for the deal? d) How many shares will be outstanding after the merger? e) Suppose the HHI in the banking sector in Russia will be 0,30 after the merger. Would the Russian antitrust authorities approve of the M&A? Explain why or why not