CIMA Exam CIMAPRA19-F03-1 Topic 1 Question 71 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 71
Topic #: 1

Company C has received an unwelcome takeover bid from Company P.

Company P is approximately twice the size of Company C based on market capitalisation.

Although the two companies have some common business interests, the main aim of the bid is diversification for Company P.

The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C.

There is a cash alternative of $5.50 for each Company C share.

Company C has substantial cash balances which the directors were planning to use to fund an acquisition.

These plans have not been announced to the market.

Thefollowing share price information is relevant. All prices are in $.

Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?

AWrite to shareholders explaining fully why the company's share price is under valued.

BChange the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.

CPay a one-off special dividend.

DRefer the bid to the country's competition authorities.

Show Suggested Answer

Suggested Answer: A

by Whitley at Jul 30, 2023, 02:21 PM

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2 days ago

I believe Company C should also consider changing the Articles of Association to protect against future hostile takeovers.

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5 days ago

I agree with you, Margery. It's important to ensure fair competition in the market.

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6 days ago

I think Company C should refer the bid to the competition authorities.

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