On April 28, 2016, St. Jude Medical issued a press release announcing its acquisition by Abbott:

"Abbott (NYSE: ABT) and St. Jude Medical, Inc. announced today a definitive agreement for Abbott to acquire St. Jude Medical. Under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and a fixed exchange ratio of 0.8708 shares of Abbott common stock, representing total consideration of approximately $85 per share. The combined company will have an industry-leading pipeline expected to deliver a steady stream of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care."

Assume 294 million St. Jude shares are expected to be acquired by Abbott.

Which of the options below are the most appropriate if St. Jude shareholders wanted to ensure total equity consideration never dipped below $24 billion?

• Deal structure would need to be modified such that the exchange ratio converts to a floating exchange should St. Jude share price go lower than $64.12.
• Deal structure would need to be modified such that the exchange ratio converts to a fixed exchange should Abbott share price go lower than $40.06.
• Deal structure would need to be modified such that the exchange ratio converts to a floating exchange should Abbott share price go lower than $40.06.
• Deal structure would need to be modified such that the exchange ratio converts to a fixed exchange should St. Jude share price go lower than $64.12.
• No action is required, as currently structured equity consideration cannot dip below $24 billion.

 

Answer rating: 100% (QA)

Answer To ensure that total equity consideration never dips below 24 billion the most a... View the full answer