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Mergers, Acquisitions and International Financial Managemen

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Gamma Corporation is considering a two-step buyout of Delta Corporation. Delta Corporation has 2,000,000 shares outstanding and its stock price is currently $40 per share. In a two-step buyout, Gamma Corporation will offer to buy 51% of Delta Corporation's shares outstanding for $68 per share in cash, and the balance in a second offer of 980,000 convertible preferred stock shares. Each share of the convertible preferred stock would be valued at 45% of the current value of Delta Corporation's common stock. In the alternative, Gamma Corporation is also considering a one-step buyout of all of Delta Corporation's shares at $65.25 per share. Compare the total costs of the two alternatives.

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The solution is very easy to understand and concise. It is an excellent response for students who want to understand the concepts and then use the same concepts to solve similar problems in the future. Overall, an excellent response. The solution provides the necessary steps which are easy to follow.

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Two Step Buyout:
Phase 1: # of Shares Bought = .51*2,000,000 = 1,020,000
Total Price ...

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