Real Life Takeover Case Study

1. Introduction
There are different ways to combine business. Different takeover methods may result in different decision. It is important to choose the most appropriate method during the business combination. This report will simply evaluate two methods of takeover and differentiate the two concepts acquisition premium and goodwill on acquisition. At the end of the report, a real life takeover case will be discussed from six aspects.
2. Definitions
2.1 Takeover offers
There are two types of “takeover offers”, including off-market and on-market. The off-market bid means that the bidder provides an offer to all shareholders of a target company in order to purchase whether quoted or unquoted securities, while the on-market bid is that the bidder’s broker stands in the market for at least one month and asks to make cash acquisitions of only quoted securities at the bid price through ASX.
According to Chapter of the Corporations Act 2001, if one’s voting power could rise from under 20% to over 20%, or from a section which is over 20% to 90% through this transaction, two situations are prohibited. In addition, Chapter 6A Compulsory acquisition: shareholders who have more than 90% securities could make acquisition to 100% compulsorily. Moreover, Chapter 6C Disclosure of holdings: financial statement must disclose details of shareholders who hold more than 5% voting right and any change of 1% or more.

2.2 Scheme of arrangements
If only the agreement is more than 75% by value and 50% by quantity but also the court thinks that this scheme would not potentially harm to any parties, then this scheme would be regarded as success.
The legal requirements for scheme of arrangements which under Chapter 5 of the Corporations Act, the court approves a scheme which was proposed by the target company for transferring or cancelling 100% of the target shares to the bidder. To be more specific, if company utilize this method for acquisitions, it is likely that bidder could get 100% of the target shares or 0%.
2.3 Differences between “takeover offers” and “scheme of arrangements”

Firstly, scheme must have the co-operation from target because they must have a meeting for each other. Therefore the target controls the whole process. But if the target company is not willing to deal, in takeover it also could become true, which is regarded as a hostile takeover and means that the bidder hold the control. Secondly, as what I mentioned before, the bidder could get “all or nothing” via scheme, while the acquisition of the method of takeover depends on levels of acceptances. Thirdly, through scheme the company could reduce or return the capital, asset and demerger. Scheme is far more quickly than takeover, only about 3 months. But takeover is flexible to go up offer price.
2.4 Evaluation of factors that influence company to choose method
 Bidder who would like to use Takeover
1. the bidder who want to buy securities that the target is not willing to sell
2. the bidder who do not have 100% confident to get the approval from court
Bidder who would like to use Scheme.
1.the bidder who want more cash pool
2.the bidder who want to transfer some assets or liability or reduce target’s capital
3. Part B Definition
3.1 Acquisition premium
Acquisition premium is the value when the bidder company obtains the target company’s equity paid to shareholders of the target company above its market price. The premium paid before the acquisition and often recorded as “goodwill” in the balance sheet, representing the increase cost of acquiring a target company.
For example, company A intended to acquire company B and offered $30 per share when the share price of company B was $25 per share, this meant company A was willing to pay a 20% acquisition premium. However, acquisition premium is not always a premium acquiring a company, due to the economic situation or fluctuation, the premium can become a discount. Furthermore, there is no

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