In December 2000, the shareholders of General Mills submitted merger prospectus and proxy statement, which sets out the terms by which General Mills to buy Pillsbury from Diageo PLC. Payment is made up of shares of General Mills shares, transfer of debt Pillsbury and unusual contingent payments. The task of the student is to evaluate and appreciate the contingent payment in an attempt to assess the attractiveness of the offer and recommend how shareholders should vote on the proposal. Contingent payment contingent reminds correct (CVR), which protects the lack of sellers in the acquisition. CVRs can be modeled in the form of two options: (1) long put struck at a low share price and (2) a short call struck at a higher share price. CVR combination with the main buyer of the stock transfer of payments to the seller with a fixed collar floating shares. Student analysis of the contingent payment may be expanded in two of its main parameters and appreciate the whole instrument. The teaching objectives here are: (1) to student skills to identify and evaluate options, (2) to show how the use of conditional payments can overcome different opinions about the value of the target firm, and (3) suggest an important role in assessing the synergies expected payment terms .
This Darden study. "Hide
by Robert F. Bruner Source: Darden School of Business 14 pages. Publication Date: February 27, 2001. Prod. #: UV0089-PDF-ENG
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