You work for a leveraged buyout firm and are evaluating a potential bu
QUESTION
You work for a leveraged buyout firm and are evaluating a potential buyout of UnderWater Company. UnderWaters stock price is $20, and it has 2 million shares outstanding. You believe that if you buy the company and replace its management, its value will increase by 40%. You are planning on doing a leveraged buyout of UnderWater, and will offer $25 per share for control of the company. a. Assuming you get 50% control, what will happen to the price of non-tendered shares?b. Given the answer in part (a), will shareholders tender their shares, not tender their shares, or be indifferent?c. What will your gain from the transaction be?
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