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Chapter 5: 3BP-a (page 567)

Katie Homes and Garden Co. has 10,640,000shares outstanding. The stock is currently selling at $52 per share. If an unfriendly outside group acquired 25percent of the shares, existing stockholders will be able to buy new shares at 30 percent below the currently existing stock price.

a. How many shares must the unfriendly outside group acquire for the poison pill to go into effect?

Short Answer

Expert verified

The unfriendly group must acquire 2,660,000 shares for poison pill to take effect.

Step by step solution

01

Information provided in the question

Share outstanding =10,640,000

Trigger point =25%

02

Calculation of shares that the unfriendly group must acquire

The unfriendly group should acquire 2,660,000shares

Number of shares to be acquiredlocalid="1650266012464" =Total shareslocalid="1650266022188" ×Trigger point

localid="1650266032161" =localid="1650266088018" 10,640,000localid="1650266041576" ×localid="1650266126526" 25%

localid="1657868055782" =localid="1650266136862" 2,660,000

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