1. Determine the amount Jackson Enterprises is willing to pay in terms of goodwill. 2. If JEs shares are currently trading at $62.43, then how

1. Determine the amount Jackson Enterprises is willing to pay in terms of goodwill.

2. If JE’s shares are currently trading at $62.43, then how many shares should JE offer for every share of MSI?

3. Assuming that MSI will be treated as a separate reporting subsidiary following the merger, develop the balance sheet for the subsidiary.

4. Calculate the Herfindahl–Hirschman Index for the industry both before and after the pro-posed merger.

Jackson Enterprises (JE) is offering a 25% takeover premium to Michael Studios, Inc. (MSI) for the firm’s 2 million outstanding shares, which are currently trading for a pre-offer price of $20 per share.

The balance sheet for MSI is:

The market value of MSI’s fixed assets is $60,000,000.
The sales (in millions) for the industry by company are:
Sales
ABC ......... $89
CWC .........66
DEF ...........35
JE ...........45
KOJ ...........42
MSI ...........18
SEE ...........76

Assets Liabilities Curent $15,000,000 Fixed Total Current Long-tem Total Owner's equity Total liabilities and equity S 7,500,000 25.000.000 $32,500,000 27.500.000 $60,000,000 45.000.000 S60,000,000