The directors of Gross plc have made a 850p per share cash bid for Klinsmann plc, a company that is in a similar line of business. The summarised accounts of these two companies are as follows:

Included in the operating costs for each company are the purchases made during this year - £100 million for Gross and £70 million for Klinsmann.
The number and market value of each company's shares are:
Gross Klinsmann
No. of shares issued.............100m...................20m
Share price.........................600p...................700p
Required
Analyse this bid to include:
(a) Possible ways in which Gross may hope to recoup the bid premium when operating Klinsmann.
(b) The final and strategic effects on Gross if the bid is accepted by Klinsmann's shareholders.

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Gross £m 216 105 Klinsmann fm Sales (all credit) Operating costs Operating profit Interest Earnings before tax Tax 110 41 31 10 21 Earnings for shareholders Fixed assets Current assets Stock Debtors Cash 76 Current liabilities Creditors Bank overdraft (28) (12) (28) 40 116 Net current assets Total assets less current liabilities Long-term liabilities Net assets