Mergers And Options

® 1 Ross-Westerfield-Jaffe: I VI. Options, Futures, and I 22. Options and Corporate I I © The McGraw-Hill

Corporate Finance, Sixth Corporate Finance Finance: Basic Concepts Companies, 2002

Edition

■ Figure 22.13 Cash Payment to Each Newly Issued Share of GM Stock in Acquisition of Pillsbury Division of Diageo PLC

Cash payment to each newly issued share of General Mills stock

Price of General Mills stock one year after closing

Each newly issued share of GM stock receives a cash payment equal to the difference between $42.55 and the price of GM stock one year after closing, up to a maximum of $4.55. For example:

Price one year after closing

$38 or below

Cash payment per share

■ Figure 22.14 Total Value of a Newly Issued Share of GM Stock, Including the Cash Payment

Ross-Westerfield-Jaffe: I VI. Options, Futures, and I 22. Options and Corporate I I © The McGraw-Hill

Corporate Finance, Sixth Corporate Finance Finance: Basic Concepts Companies, 2002

Edition

642 Part VI Options, Futures, and Corporate Finance

■ Figure 22.15 Payoffs to Implied Puts in General Mills'Acquisition of Pillsbury

Price of GM stock one year after closing

Combined payoff from buying a put with K = $42.55 and selling a put with K = $38 is identical to payoff from contingent value rights plan

Price of GM stock one year after closing

Combined payoff from buying a put with K = $42.55 and selling a put with K = $38 is identical to payoff from contingent value rights plan

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