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Butler Chemical: Asset purchase or subsidiary merger

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Butler Chemical Company (manufacturer of industrial chemicals) has been struggling over the past few years with the stagnation of agricultural and commercial construction. The company has substantial debt outstanding and last week it disclosed that it may not be able to meet all of its debt obligations if business does not improve. While there is hope that the improving economy will generate sufficient increases in revenues and operating cash flow to avoid bankruptcy, the company has hired an investment banker to explore the possibility of sale either through liquidation or merger. Suppose the banker approached Dow Chemical Company about this opportunity.

Describe the factor that would make Dow favor either an asset purchase or forward subsidiary merger rather than a conventional merger (T merged into P)?

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Solution Summary

The solution explains the nature of the merger. The asset purchase or subsidiary mergers are analyzed.

Solution Preview

The liabilities of the seller is separate, not assumed by the buyer.

Forward Subsidiary Mergers are 3-party transactions involving the Buyer, a Subsidiary of the ...

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