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Ch29CaseSolution - to gain 50.1 control you will only...

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Mini Case: U.S.Steel’s case. You have 3 choices: tender, or do not tender or sell in the market. If you do sell your shares in the market, at some point somebody else would need to make a decision to “tender” or “not tender” as well. It is important to recognize that the firm has about 60 million shares outstanding (since 30 million shares will give US Steel 50.1% of Marathon shares). Let’s consider the possible selling prices, which you will receive for each of the following scenarios: US Steel Tender offer Succeeds Fails Tender A pro-rated Price between $125 and $85 Market price Do not Tender $85 Market price If US Steel’s tender offer fails, you are equally well off since your share value is determined by the market price. If you choose not to tender, and 30 million shares were tendered, US Steel succeeds
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Unformatted text preview: to gain 50.1% control, you will only receive $85 a share. If you do tender, the price you will receive will be no worse than $85 a share and can be as high as $125 a share. Depending on the number of shares tendered, you will receive one of the following prices. If only 50.1% tendered, you will get $125 per share. If the shares tendered exceed 50.1% but less than 100%, you will get more than $105 a share. If all 60 million shares were tendered, you will get $105 per share: ( 29 ( 29 85 $ 60 30 125 $ 60 30 + It is clear that, in the above 3 cases, when you are not sure about whether US Steel will succeed or not, you will be better off to tender your shares than not tender. This is because at best, you will only receive $85 per share if you choose not to tender. B-188...
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