- Name Page 4 The Weekend Johnson Johnson Announced A Revised Acquisition For 32 00 2 20 Points Suppose That Johnso 1 (64.4 KiB) Viewed 24 times
Name Page 4 the weekend, Johnson & Johnson announced a revised acquisition for $32.00 2. [20 points] Suppose that Johnson & Johnson Stock closed at $61.20 on last Friday. Over Corporation as follows: each share of Guidant common stock will be t for Guidant in cash and 0.5 shares of Johnson & Johnson common stock. The original deal was that Johnson & Johnson common stock. Currently, Guidant has 340 million shares outstanding each share of Guidant common stock can exchange for $35.00 in cash and 0.5 shares of while Johnson & Johnson has 3 billion shares outstanding. a) [10 points] When the market opened at 9:30 this morning, what was Johnson & Johnson's share price if the market if efficient (only consider the impact of the cash portion of the offer)? If Johnson & Johnson's stock price closed at $63.64 and Guidant's stock price closed at $61.73 per share on Monday, what was the term of acquisition that the market had expected (Assume that the cash portion is fixed at $32)? b) [10 points] If the term of acquisition is that each share of Guidant common stock can exchange for 1 shares of J & J common stock, and you are confident that the merger will go through, how would you design an investment strategy and implement it tomorrow morning to profit from it given that the actual stock prices of J & J and Guidant are $63.64 and $61.73, respectively?