Ecolab announced its intention to purchase Nalco on July 20, 2011. Ecolab agreed to pay $38.80 per
Question:
Ecolab announced its intention to purchase Nalco on July 20, 2011. Ecolab agreed to pay $38.80 per share for Nalco, a 32 percent premium over Nalco’s trading price. Seventy percent of the deal would be in stock, with Ecolab trading its own shares for Nalco’s outstanding stock (0.7005 shares of Ecolab for each Nalco share outstanding, for a total of $3.8 billion). The other 30 percent of the purchase price would be a cash payment, for a total of $1.6 billion. Ecolab would also assume Nalco’s $2.7 billion debt load.
Exhibit 3 shows how the market reacted to the announcement. Baker attributed the steep penalty for the Nalco offer to two factors. First, over his tenure Ecolab had focused on small, “bolt-on” acquisitions representing minor extensions of Ecolab’s reach;18 the Nalco deal was the largest of Baker’s career, and investors seemed to wonder if the two companies could be combined to create strategic value. Second, Baker felt that investors assumed that Ecolab must be in trouble, and hence overvalued, if they were making a play for a company like Nalco
EXHIBIT 3Ecolab Share Price, July 18–22, 2011
Date | Open | Volume |
July 22, 2011 | 51.6335 | 11746873 |
July 21, 2011 | 51.3177 | 12081296 |
July 20, 2011 (Announcement date) | 49.4043 | 23175092 |
July 19, 2011 | 47.7603 | 1225653 |
July 18, 2011 | 49.3393 | 1364653 |
Show the number of shares outstanding after acquisition?
Show the number of shares outstanding after dilution of shares?
Intermediate Accounting Volume 1
ISBN: 9781260306743
7th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick