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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Jolene

2 months ago

The directors better have a really good reason to keep all that cash hidden from the market. That's not going to fly!

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Carole

10 days ago

Let's consider all our options carefully before making a decision. We need to protect the interests of our shareholders.

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Lilli

11 days ago

I agree, we can't just sit back and let them take over. We have to take action.

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Natalya

26 days ago

We need to come up with a plan fast. Company P is not playing around with this takeover bid.

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Simona

2 months ago

Referring the bid to the competition authorities is the way to go. Let's see if they can poke some holes in this deal.

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Felicitas

1 months ago

Hopefully the competition authorities will investigate and provide some clarity on the situation.

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Gerri

1 months ago

I think referring the bid to the competition authorities is a smart move to ensure fair competition.

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Timothy

1 months ago

Agreed, it's important to protect the interests of the company and its shareholders.

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Franchesca

2 months ago

A one-off special dividend? That's like bribing the shareholders to accept the hostile bid. Not cool.

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Audry

2 months ago

Changing the Articles of Association to increase the percentage of shareholder votes required to approve a takeover seems like a sneaky way to block the bid.

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Argelia

7 hours ago

Referring the bid to competition authorities could also be a good idea.

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Lisbeth

1 days ago

Maybe they should consider other options to protect the company.

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Angella

5 days ago

I agree, it could be seen as a defensive tactic.

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Micah

14 days ago

That does seem like a sneaky move to block the bid.

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Huey

21 days ago

Referring the bid to the competition authorities might be the best course of action to ensure fairness.

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Carolynn

1 months ago

Paying a special dividend could also be a good way to appease shareholders.

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Leota

1 months ago

I think it's important for the directors to consider all their options carefully.

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Kayleigh

2 months ago

That does seem like a sneaky move to block the bid.

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Stevie

2 months ago

The directors should fully explain to shareholders why the company's share price is undervalued. That's the most transparent approach.

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Jolene

2 months ago

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

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Vonda

2 months ago

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

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Margery

2 months ago

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

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