You just started your new position at a large investment bank You have been assigned to help a senior analyst, Ms Denham, on a Dutch Auction of shares for Thornton Danaher Inc The equity of the firm is currently closely held by the founding families and the senior managers, so there is no available market price They are hoping to raise about $270,000,000 This represents about 25 of the firms current equity value Ms Denham has estimated that the firm equity is currently worth about $1,080,000,000 ($270,000,000 is about 25 ) Of course, this is just an estimate, and what is raised will depend on what the market will bear They have decided to auction 9,180,000 shares, which will hopefully sell for about $30 per share Thornton Danaher will receive the proceeds from the sale of 9,000,000 of the shares, and your investment bank will receive the proceeds from the remaining 180,000 shares (a 2 commission) Your firm pitched the issue to several large private equity clients Fourteen sealed bids were submitted, and you have sorted them by bid price The results are shown below What marginal price will the 9,180,000 shares of Thornton Danaher sell at in the Dutch Auction Also, calculate the pro rata portion of shares each of the winning bidders will receive for the number of shares they bid How much money will Thornton Danaher receive from the auction What will your investment bank receive Bidder Price Shares $41 43 675,000 $40 87 540,000 $40 12 700,000 $38 93 850,000 $36 73 1,000,000 $35 37 1,100,000 $33 12 1,250,000 $31 54 1,450,000 $30 37 900,000 $29 42 1,475,000 $28 14 1,800,000 $27 52 1,400,000 $25 73 1,325,000 $24 28 1,900,000 00000000000000 S00000000000000 ar 5 0 0 0 0 0 0 0 0 5 0050 7 4 0 5 0 0 5 5 070020 65780124948439 37233724724238 48197315341572 ic 10086531098754 r44433333322222 dd A B C D E F G H I J K L M N Bidder Price Shares $41 43 675,000 $40 87 540,000 $40 12 700,000 $38 93 850,000 $36 73 1,000,000 $35 37 1,100,000 $33 12 1,250,000 $31 54 1,450,000 $30 37 900,000 $29 42 1,475,000 $28 14 1,800,000 $27 52 1,400,000 $25 73 1,325,000 $24 28 1,900,000 00000000000000 S00000000000000 ar 5 0 0 0 0 0 0 0 0 5 0050 7 4 0 5 0 0 5 5 070020 65780124948439 37233724724238 48197315341572 ic 10086531098754 r44433333322222 dd A B C D E F G H I J K L M N

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You just started your new position at a large investment bank. You have been assigned to help a senior analyst, Ms. Denham, on a Dutch

You just started your new position at a large investment bank. You have been assigned to help a senior analyst, Ms. Denham, on a Dutch Auction of shares for Thornton & Danaher Inc. The equity of the firm is currently closely held by the founding families and the senior managers, so there is no available market price. They are hoping to raise about $270,000,000. This represents about 25% of the firms current equity value. Ms. Denham has estimated that the firm equity is currently worth about $1,080,000,000 ($270,000,000 is about 25%). Of course, this is just an estimate, and what is raised will depend on what the market will bear. They have decided to auction 9,180,000 shares, which will hopefully sell for about $30 per share. Thornton & Danaher will receive the proceeds from the sale of 9,000,000 of the shares, and your investment bank will receive the proceeds from the remaining 180,000 shares (a 2% commission)

Your firm pitched the issue to several large private equity clients. Fourteen sealed bids were submitted, and you have sorted them by bid price. The results are shown below.

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What marginal price will the 9,180,000 shares of Thornton & Danaher sell at in the Dutch Auction? Also, calculate the pro rata portion of shares each of the winning bidders will receive for the number of shares they bid.

How much money will Thornton & Danaher receive from the auction? What will your investment bank receive?

Bidder Price Shares $41.43 675,000 $40.87 540,000 $40.12 700,000 $38.93 850,000 $36.73 1,000,000 $35.37 1,100,000 $33.12 1,250,000 $31.54 1,450,000 $30.37 900,000 $29.42 1,475,000 $28.14 1,800,000 $27.52 1,400,000 $25.73 1,325,000 $24.28 1,900,000 00000000000000 S00000000000000 ar 5 0 0 0 0 0 0 0 0 5 0050 7 4 0 5 0 0 5 5 070020 65780124948439 37233724724238 48197315341572 ic 10086531098754 r44433333322222 dd A B C D E F G H I J K L M N Bidder Price Shares $41.43 675,000 $40.87 540,000 $40.12 700,000 $38.93 850,000 $36.73 1,000,000 $35.37 1,100,000 $33.12 1,250,000 $31.54 1,450,000 $30.37 900,000 $29.42 1,475,000 $28.14 1,800,000 $27.52 1,400,000 $25.73 1,325,000 $24.28 1,900,000 00000000000000 S00000000000000 ar 5 0 0 0 0 0 0 0 0 5 0050 7 4 0 5 0 0 5 5 070020 65780124948439 37233724724238 48197315341572 ic 10086531098754 r44433333322222 dd A B C D E F G H I J K L M N