Answer Happy

There are 797.6 million shares outstanding in company T. Mister M has acquired 73,5 million shares at an average price of $40 per share before filing with the SEC on April 4, 2023. (a) [10 points] Suppose M decides to launch a tender offer for T. Under his control, the expectation is that T's equity will be worth $65 per share (even if the pre-bid market price was only $40 per share). M wants to make an unrestricted offer of $60 per share in cash conditional on reaching 50% of shares. The cost of the bid is $100 million in legal fees. Assume that (except for Mister M) only small, dispersed shareholders own company T. Will the bid succeed? Explain. (b) [10 points] At what price would the bid succeed? Will M cover his cost at that price? How? (C) [10 points] On April 15, 2022, T's board of directors introduced a poison pill (the Shareholder Rights Plan) with validity until April 14, 2023. Under the Rights Plan, the rights will become exercisable if an entity, person, or group acquires beneficial ownership of 15% or more of T's outstanding common stock in a transaction not approved by the Board. If the rights become exercisable due to the triggering ownership threshold being crossed, each right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase a new share for each share they own at half of their current price. What happens when M crosses the 15% stake (for example by acquiring 46.2 million more shares on the market at $55 per share)? Explain carefully (d) [Bonus points) How does your analysis of the tender offer in part b) change with the poison pill? Please explain.