Energetic Inc

question 45

Essay

Energetic Inc., believes that it can acquire Satisfied Industries and improve efficiency to the extent that the market value of Satisfied will increase by $5 million. Satisfied currently sells for $20 a share, and there are 1 million shares outstanding.
a. Satisfied's management is willing to accept a cash offer of $25 a share. Can the merger be accomplished on a friendly basis?
b. What will happen if Satisfied's management holds out for an offer of $28 a share?

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Definitions:

Insanity Of Offeror

A legal defense where the validity of a contract is questioned due to the mental capability of the party making the offer at the time of agreement.

Counter-Offer

An offer made in response to another's offer, effectively rejecting the original offer and presenting a new one for consideration.

Stipulated Time

A specific period designated in an agreement or contract by which a certain action must be completed or fulfilled.

Market Value

Market value is the estimated price at which an asset or service would trade in a competitive auction setting.