1. Raspberry Ltd is currently undergoing an equal access share buy-back scheme and is concurrently having an on-market buy-back of $500 million. The market price of Raspberry Ltd is now quoted at $24.00 per share, while the share price has been appreciating steadily in the past two years by an average of 15 per cent per annum. The off-market buy-back price was announced at $22.60 per share, where the capital component of the offer is $10.20 per share and a fully-franked dividend is $12.40 per share. Corporate tax rate is 30 percent. A hedge fund, Privateer LLC, has become a shareholder in Raspberry Ltd by acquiring a 4.5 percent ownership in Raspberry Ltd over the past year. Privateer LLC has rejected participating in this equal access buy-back scheme at the current share price. Privateer LLC however made a counter offer to Raspberry Ltd last Monday to tender all its shareholdings in Raspberry Ltd at the price of $24.20 per share.

Discuss the following:

1. Outline your view for how Raspberry Ltd management should deal with Privateer LLCs offer.
2. Advise a domestic retail shareholder (who has a marginal tax rate of 32.5 percent) and a superannuation fund (15 percent tax rate) whether either of them should participate in Raspberry Ltds share buy-back. Assume that shares in Raspberry Ltd were bought by the retail investor and the superannuation fund more than three years ago at a price of $14.20 per share.

b) Discuss the role of an underwriter in an equity capital raising.