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CIMAPRA19-F03-1 Exam - Topic 6 Question 20 Discussion

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?
A) Write to shareholders explaining fully why the company's share price is under valued.
B) Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
C) Pay a one-off special dividend.
D) Refer the bid to the country's competition authorities.

CIMAPRA19-F03-1 Exam - Topic 6 Question 20 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 20
Topic #: 6
[All CIMAPRA19-F03-1 Questions]

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?

Show Suggested Answer Hide Answer
Suggested Answer: A

by Kristofer at May 06, 2022, 12:40 PM

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France
10 months ago
Wait, they have cash for an acquisition? Why not use that instead?
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Jamal
10 months ago
Totally agree with Billye, they need to communicate better!
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Orville
11 months ago
A special dividend? Seems like a desperate move to me.
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Leonida
11 months ago
I think they should definitely explain the undervaluation to shareholders.
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Billye
11 months ago
Company P is way bigger, this could be tough for Company C.
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James
11 months ago
Okay, let's see. If each partner has their own website, that could really slow down the re-indexing process. I'm leaning towards option A.
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Joanna
11 months ago
I'm not too familiar with Palo Alto firewalls, so I'm not 100% sure about this. But I think the Domain Controller and SSL Certificates might be relevant for User-ID, so I'll give those a try.
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Meghann
11 months ago
Option D seems a bit strange to me. Why would we wait 3 months to size the resources? Shouldn't we size them upfront based on the expected usage? I'm leaning towards C.
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Tresa
11 months ago
I remember studying how customer insights can drive value, but I'm unsure if managing discounts really adds value in the same way.
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