Advanced Corporate Finance
Vodafone Mannesmann Case
On the support of the Vodafone shareholders for the presumed merger with Mannesmann
scruple 1:
It is attaind that the share expense on declination 17, 1999 is based on a 60% incident of the synergism effects playing out and a 40% chance for stock prices to return to the levels of October 21, prior to the first merger announcements. effrontery the available data for the shares outstanding on November 19, 1999, which we assume to be applicable from October 20 onwards, when the encyclopedism of Orange became definitive, we can face the synergy benefits.
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With the help of the above table in which we mensurable the market capitalizations of the two separate companies and the merger in euros, we derived the synergy benefits Vodafones shareholders would eventually reap in case of a merger.
These benefits can be calculated using a simple-minded equation in which the December 17 share price is based on a 40% chance of prices dropping to the levels of October 21st and on a 60% chance of prices amounting to the have levels of October 21st prices and the price effect ascribed to the synergy benefits. This follows a 60% success chance of the Vodafone-Mannesmann merger.
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In the above table we assume a very strict and low fair apprise Mannesmann share price of 145,35รข‚¬, in case the merger would fail. This is the October 21 share price that occurred straight after announcement of the acquisition of Orange. Because the share price dropped considerably for some days subsequent to this announcement, it is a very conservative and low valuation of Mannesmanns share price. This, in turn, leaves us with a high beseech premium of 62.723 million euros. The market estimates the future synergy benefits at a vast amount of 110.398 million euros.
This low October 21 share price, we assume in case the merger fails, this instant increases the synergy benefits. This is because the December 17 share price is based...If you penury to get a full essay, order it on our website: Orderessay
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