Pipe Corporation Is Interested in Acquiring All of Ore Corporation

question 91

Essay

Pipe Corporation is interested in acquiring all of Ore Corporation. It currently owns 30% of the outstanding Ore stock, which it purchased six years ago for $250,000. Pipe is a manufacturer of plumbing pipes with assets valued at
$3 million and liabilities of $1 million. Ore supplies Pipe with copper from its mines that are valued at $4 million with
$3 million in mortgages. Pipe negotiates the restructuring with Ore's management. Pipe is concerned about potential environmental issues from the strip mining used by Ore and feels it needs liability protection.
a. Given these facts, what type of reorganization would you suggest for Pipe and Ore?

b. Provide a diagram of the reorganization you suggest.

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Definitions:

Privity Of Contract

A principle stating that only the parties involved in a contract have the rights and obligations under that contract.

Market Share Theory

A principle that assigns liability to manufacturers based on their market share of a harmful product when the specific source of harm cannot be identified.

Tortfeasors

Individuals or entities that have committed a tort, which is a civil wrong or injury that can be redressed by awarding damages.

Allegedly Harmful Products

Allegedly harmful products are goods reported or claimed to cause damage or injury, often subject to investigation or legal action to ascertain liability.