Question One (20 Marks) Buyer Corporation and Target Corporation are both public companies whose common shares...

  

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Question One (20 Marks) Buyer Corporation and Target Corporation are both public companies whose common shares are traded on the Lusaka Stock Exchange. Neither company currently owns any of the stock of the other. Neither is an investment company. Buyer is incorporated in a state that has adopted the Model Business Corporation Act (MBCA). Target is a Delaware corporation. The boards of directors of Buyer and Target have agreed to a triangular merger. Merger Sub, a wholly-owned subsidiary of Buyer, will merge into Target, with Target being the surviving company. Target's articles of incorporation will not be amended in the merger. Buyer will receive Target common stock for its Merger Sub shares (about 10% of the amount of Target common stock outstanding before the merger). Target's shareholders will receive two non-voting preferred shares of Target for each Target common share they currently own. After the merger, neither Target's common shares nor its preferred shares will be traded on the Lusaka Stock Exchange or any other organized market. Explain (1) whether Target's shareholders must vote to approve the merger and (2) whether Target shareholders who dissent will be entitled to appraisal rights. Question Two (20 marks) Endibank Merchant Banking Services Limited was incorporated in the 1989 as a subsidiary of South African Bank. The bank is engaged in Merchant Banking, Advisory Services, Stock Broking, Depository Participant Activities, Distribution of Mutual Fund and other Investment Products and online Trading. The bank is registered with Securities Exchange Board of Zambia undertaking the following assignments: Under various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for public issues, rights issues and private placement. For acquisition of shares & takeovers under SEC. For Employee stock option scheme/Stock Purchase Scheme by Corporates under the SEC, Guidelines. Assume that you are appointed as Assistant Manager in Endibank Merchant Banking Services Limited. XYZ Company approaches bank to manage a new issue of shares of 1 Billion Kwacha. This task is entrusted to you to independently handle this new issue of shares. Handling of this type of task is new and challenge to you. You have to establish your credibility to your employer and client of XYZ Company. 1. As an Assistant manager, how you would proceed to manage this issue of 1 Billion kwacha keeping in view the guidelines of SEC, Registrar of companies & Stock Exchange? 2. Besides issue of shares, what other services are provided by Merchant Banks to its customers? Question Three (20 Marks) Seller, Inc. is an MBCA corporation. It is comprised of several divisions, each engaged in different lines of business. Seller has agreed to sell all but one of its divisions to Buyer, Inc. for cash. The one division Seller is not selling constitutes 10% of its total assets and is responsible for 30% of Seller's total revenues and net income. Upon completion of the sale, Seller will distribute the cash to its shareholders as a special dividend. This sale is not in the regular course of Seller's business, Discuss whether the approval of Seller's shareholders is required to accomplish the sale. Assume that neither Buyer nor Seller currently owns any of the other company's shares. Question One (20 Marks) Buyer Corporation and Target Corporation are both public companies whose common shares are traded on the Lusaka Stock Exchange. Neither company currently owns any of the stock of the other. Neither is an investment company. Buyer is incorporated in a state that has adopted the Model Business Corporation Act (MBCA). Target is a Delaware corporation. The boards of directors of Buyer and Target have agreed to a triangular merger. Merger Sub, a wholly-owned subsidiary of Buyer, will merge into Target, with Target being the surviving company. Target's articles of incorporation will not be amended in the merger. Buyer will receive Target common stock for its Merger Sub shares (about 10% of the amount of Target common stock outstanding before the merger). Target's shareholders will receive two non-voting preferred shares of Target for each Target common share they currently own. After the merger, neither Target's common shares nor its preferred shares will be traded on the Lusaka Stock Exchange or any other organized market. Explain (1) whether Target's shareholders must vote to approve the merger and (2) whether Target shareholders who dissent will be entitled to appraisal rights. Question Two (20 marks) Endibank Merchant Banking Services Limited was incorporated in the 1989 as a subsidiary of South African Bank. The bank is engaged in Merchant Banking, Advisory Services, Stock Broking, Depository Participant Activities, Distribution of Mutual Fund and other Investment Products and online Trading. The bank is registered with Securities Exchange Board of Zambia undertaking the following assignments: Under various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for public issues, rights issues and private placement. For acquisition of shares & takeovers under SEC. For Employee stock option scheme/Stock Purchase Scheme by Corporates under the SEC, Guidelines. Assume that you are appointed as Assistant Manager in Endibank Merchant Banking Services Limited. XYZ Company approaches bank to manage a new issue of shares of 1 Billion Kwacha. This task is entrusted to you to independently handle this new issue of shares. Handling of this type of task is new and challenge to you. You have to establish your credibility to your employer and client of XYZ Company. 1. As an Assistant manager, how you would proceed to manage this issue of 1 Billion kwacha keeping in view the guidelines of SEC, Registrar of companies & Stock Exchange? 2. Besides issue of shares, what other services are provided by Merchant Banks to its customers? Question Three (20 Marks) Seller, Inc. is an MBCA corporation. It is comprised of several divisions, each engaged in different lines of business. Seller has agreed to sell all but one of its divisions to Buyer, Inc. for cash. The one division Seller is not selling constitutes 10% of its total assets and is responsible for 30% of Seller's total revenues and net income. Upon completion of the sale, Seller will distribute the cash to its shareholders as a special dividend. This sale is not in the regular course of Seller's business, Discuss whether the approval of Seller's shareholders is required to accomplish the sale. Assume that neither Buyer nor Seller currently owns any of the other company's shares.

Answer rating: 100% (QA)

Quiz 1 Part 1 Targets shareholders must vote to approve the merger if the merger is not exempt from shareholder approval under the MBCA and shareholder approval would be required under the second pron... View the full answer