Target Co is trading at $1. Bidder Co believes it is trading at fair value on a stand alone basis but that if it controlled Target Co it could add 20c per share of value. It further believes that if it combined its operations with Target Co it could extract synergies of 30c per share. To get the deal over the line it decides to share the full control premium plus half the synergies with Target Co shareholders in the offer price. There are no other sources of value in the deal. What does Bidder Co bid?

Select one:

a.

A takeover premium of 50% which includes a control premium of 20%

b.

A takeover premium of 35% which includes a control premium of 35%

c.

A takeover premium of 15% which includes a control premium of 20%

d.

A takeover premium of 35% which includes a control premium of 20%

e.

None of the options are correct